Are high risk UK payday lenders dangerous?

Payday loans are becoming commonplace practice in the United Kingdom.

With the state of the economy on a downturn, many consumers are in desperate need of money to get from one pay cheque to the next.

How they work

Now, UK payday loans are offered online to allow for quicker processing and added convenience. Sometimes the funds can be deposited in the borrower’s bank account within several hours. These instant loans are a popular solution to short-term financial problems because they can be obtained quicker and easier than loans from traditional financial institutions.

They can be used to help take care of certain unexpected financial obligations for people who are on a small budget. These loans are also referred to as cash advances. Cash advances are sums of money that are loaned until the borrower’s next pay period. While some payday loan companies do not offer online application, many of the more established companies do.

Online Application Guidelines

When compared to traditional loans given by banks, English payday lenders such as SimplePayday offer a much more quick and simpler application process that includes minimal paperwork. This particular company says a typical borrower can expect to receive an amount from £100-£1,000.

The amount will also be determined by the money the borrower needs as well as their ability to repay the loan and their borrowing history, if any, with the payday lender. Usually, the borrower has 2-4 weeks to repay the loan and they will be required to borrow a certain minimum amount. All consumers who seek help from a payday loan company must be residents of the United Kingdom, at least 18 years old, a full-time employee and a bank-account holder.

Government Regulations

Payday loans in the UK are usually needed to handle urgent cash needs. In order to protect desperate consumers, the British Government has put several rules in place. These regulations prevent illegal lending tactics and safeguard consumer interests. Therefore, payday borrowers do not have to be concerned about being taken advantage of or having their personal information sold to third-party marketers.

The Online Application Procedure

The most hassle-free method of obtaining a loan is applying on the Internet. It is a rare occurrence for application data to be hacked because lenders are required by law to use website security measures to keep customer information protected. The majority of pay-cheque lenders do not require the borrower to submit to a credit-report review. The main factor that will determine an applicant’s approval is their employment history.

While many lenders offer in-person and online applications, a few loan companies have started using paper-free procedures. This strategy makes the process more convenient for not only the consumer but also the lender. All information is verified electronically without the use of a fax machine.

Consumers who have an emergency cash-flow situation, but who are plagued by bankruptcy or bad credit have the option of obtaining UK payday loans. Some UK lenders specialise in loans that allow people to borrow an average maximum of £1,000 against an upcoming pay cheque. These loans do not require a prior credit review for approval. The lender will offer a loan amount based on the individual’s ability to repay, which is determined by their bank account information and verified payslips.

Are these loans not high risk?

After obtaining a cash advance, the recipient will have to repay the money when they receive their next pay cheque. The typical loan term lasts anywhere from 14-21 days and comes with an applied interest rate. Because UK payday lenders do not perform a credit review or ask to secure collateral, they tend to charge above-average interest rates. But, in comparison to the traditional loan process, such as through banks or finance companies, obtaining a payday loan is quick and easy. Some lenders even allow customers to complete an application online, saving them an extra visit to the payday-loan store.

Fast Approval Process

Those who seek UK payday loans are usually approved quickly. The majority of lenders will file and approve an application within a 24-hour time period. Once approved, the customer can either pick up a cheque at the loan office or opt to have their borrowed funds directly deposited into their bank account. The fast approval process allows recipients to quickly take care of their financial issue quickly – sometimes the same day they are approved. There are various reasons that prompt British consumers to get payday loans. Some of these reasons include vehicle repairs, medical bills, utility bills, mortgage payments, rent payments and overdue bills.

Repaying a Payday Loan

While the specific terms will vary according to the lender, loan repayments are typically made in one installment. Most of the time, the lender will require the borrower to set up an automatic deduction from their bank account before or on the agreed-upon due date. It is imperative that the consumer ensures there will be enough funds to cover the repayment on the deduction date; otherwise an extra fee will be charged for the declined transaction.

A Word to Consumers

Although obtaining an online loan is an extremely easy process, it is necessary to compare the interest rates offered by various lenders before selecting a loan company. Each lender has their own fee structure that widely differs from company to company. Regardless, the extended fees for late payments, declined transactions and other anomalous charges are rather high in comparison to other lenders. Therefore, consumers are advised to repay their payday loan on time.