Borrowing Short-Term Money: What You Need To Know
There is no denying that borrowing any sort of money is risky, but in some cases, it is a necessity. It is all about lending responsibly. Borrowing short-term cash tends to have higher interest rates, which is why being more cautious is a necessity.
Read on to discover everything you should know, from the history of these sorts of loans to information on what you should be looking for when selecting a loan like this, and much more.
A Short History
Payday loans have been around for a much greater time than a lot of people estimate. With short term payday loans receiving more media acknowledgement and discussion over the past few years, it is easy to assume that they have only been around for a decade or so. However, short term loans like this date back to the 19th century.
The short term lending industry does not originate in the UK. Rather, it came about in America in the 19th century. Workers lived from payday to payday because they did not have safe depository access or bank accounts. When they collected their wages at the end of the month, they would not deposit their cash anywhere safe.
There were times when they would need assistance because of absences from work or unplanned expenses, the same reasons why we use payday loan companies today. Short term loans were the only option for people who did not have anything to tempt a pawnbroker with.
Unfortunately, the rise of these loans led to loan sharks. This gave the industry a violent and unsavoury reputation. Luckily, in the 1940s and 50s there was the introduction of the first official regulation for the industry, which included a six per cent interest rate cap for all short term loans.
It was not until 1990 that payday loans were properly introduced in the UK. More and more people turned to this sector in 2008 when the recession hit. More than four million payday loans had been taken out in the UK by 2009. The industry proved to be a welcome relief for a lot of people during this period, as traditional loan providers were tightening their belts and restricting whom they lent to.
How To Ensure Your Loan Is As Cheap As Possible
Cheap payday loans can be a lifesaver for those who find themselves in a bit of a sticky financial situation. When looking for the best payday loan, one of the most crucial things you need to do is ensure it is affordable. With that being said, we have some top tips below.
- Shop around online – Not all short term payday loans are created equally. Although the industry is regulated and there is an interest rate cap, some companies charge more than others. Therefore, it pays to consider several companies rather than going for the first one that accepts you.
- Stick to your side of the deal – An instant payday loan can soon become very expensive if you miss the repayment dates you have agreed to. Sticking to your side of the bargain is the most pivotal step you need to follow if you want to ensure your loan does not go up in price.
- Being wary of hidden fees – When looking for the best payday loan, you need to be mindful of the fact that some companies charge hidden fees. For example, there are some payday lenders that impose a fine on anyone that attempts to pay their loan back early. You need to stay away from these payday loan companies otherwise you could soon find that you owe way more than expected.
- Be realistic – Remember it’s all about affordability. A loan may be cheaper if you pay it back over a shorter period, say three months. However, if you cannot afford to make the payments over three months, then it will soon end up being more expensive. You’ve got to think about what is going to be right for your financial situation.
Instant Approval – Is There Such A Thing?
Payday loans instant approval are widely advertised. But, is there such a thing as an instant approval? How long do you actually need to wait to receive an answer regarding your application? Read on to discover everything you need to know.
First of all, let’s start by saying there is no such thing as an instant payday loan. You cannot simply submit an application and expect the money in your bank account within a mere minute. It does take time to look at and consider the form you have submitted. However, this is one of the fastest lending methods available, and thus speed really is a benefit you can expect when applying for this type of loan.
Nevertheless, the truth is that every application is different. If your application has many gaps and does not provide the information the lender requires, then it will definitely take a bit longer. This is why it is vital to answer every question on the application and provide honest and thorough information. Responsible payday lenders will evaluate your application to ensure you can make the repayments in accordance with the schedule selected. This takes a little bit of time.
If you pass the application with flying colours, of course, you will get your money very quickly. Rest assured that all payday loan companies recognise the urgency of your situation, and they will do everything in their power to give you an answer regarding your application as quick as they can. Once you have been approved, you can expect the money within 24 hours, with most lenders depositing it in your bank within a mere hour or two.
What To Do If You Can’t Make A Payment
Payday loans have been designed to assist people that find themselves in a short-term financial emergency. If you have a bad credit rating, or no rating at all, bad credit payday loans are available. In most cases, payday lenders want to see if you can pay the loan back now, as opposed to what has happened in the past. But, what if your situation has changed and you can no longer make the repayment? Read on to discover everything you need to know.
When taking out a payday loan, the lending company will assess your ability to repay it, and this is something you should consider carefully as well. They will look at your monthly income to ensure you have the cash to repay the loan in accordance with the repayment schedule that has been agreed. This makes certain that the borrower is going to be in a position to pay the lending company every month.
Nevertheless, it does not always work out this way. Sometimes, circumstances change, and it makes it impossible for the individual to pay back their loan. They could have suffered another financial emergency, for example, their car may have broken down, or they may have had trouble getting their wages that month.
When this happens, a lot of borrowers have the tendency to simply keep quiet and hope the problem goes away. It won’t. Every day that passes, they find themselves owing more and more money to the lender.
Instead, the best thing to do is to give the company a call. If you have chosen a responsible instant payday loan lender in the first place, there is a high chance that they will be understanding of your situation. They will try and put together a new repayment plan that is better suited to you.
You may incur some added costs along the way, but affordability will be considered and payments will be manageable. After all, if you have taken out a short-term loan, the last thing you want is for your rating to get worse because you haven’t repaid the loan on time.
To conclude, we hope that you have found this guide helpful if you have found yourself in a bit of financial difficulty and you are considering a short-term loan. There is no denying that short-term loans can be beneficial in certain circumstances.
However, they are not for everyone. You should never jump right in until you have carefully assessed all of your options and made sure that this is the right choice for you. Although you may feel this is an urgent situation, rash decisions are never good ones.