A Borrower’s Guide to Payday Loans

Payday Loans | Guide | UK

If your washing machine breaks down and you need to have it fixed or replaced straight away, what do you do if you don’t have cash at hand there and then? Many of us will contact a payday loan lender – you get your money in a few minutes paid directly to your bank account and then you settle the loan in full on your next payday.

Of course, payday loans aren’t just there for faulty washing machines. The most popular reasons people take out a payday loan include car repairs, unexpected medical bills, funeral expenses, home improvements, and an unexpected loss of income or non-receipt of salary.

The number of payday loan lenders is a lot lower than it was a few years ago – and that’s a very good thing. We’ll tell you why it is so good that there are fewer of them out there than before and how LoanTube is changing payday loans for borrowers.

Payday Loans in the UK

Payday loans have been around in the UK for about forty years now. Originally, they were called “cheque cashing services”. What you’d do is take a cheque into the shop and they’d pay out on that cheque, minus a fee. On the day you got paid, the cheque cashing company would collect what you owe them from your bank account.

Fast forward to around 2007. The first payday loan companies launched payday loans online – there was no longer a need to go into town to the cheque cashing shop. You could do everything in two or three minutes and then you’d get back one of three answers from the payday loan company – “yes”, “we need more information”, or “no”.

If it was a “yes”, you could get your money in minutes. If it was “we need more information”, you may have to answer a few questions over the phone or send in a few pages of documentation, like a utility bill, a wage slip, or a copy of your passport or driving licence.

For a few years, the number of people taking out payday loans exploded as did the number of companies entering the market offering consumers payday loan. Unfortunately, a few rogue firms charged unbelievably high rates of interest and used debt collection methods that were not ethical.

In 2016, the Financial Conduct Authority stepped in – they’d had enough. They saw how important payday loans were to many Brits but wanted to make sure that consumers were protected. In addition to introducing new rules about how debt is collected, they brought in three more important consumer protections:

  • A cap on interest – you may not be charged any more than 0.8% interest a day
  • A cap on fees – you could not be charged more than £15 for defaulting (missing a payment) and payday loan companies could not up the interest rate you were paying if you defaulted
  • A cap on the overall amount you had to pay back – no payday loan company is allowed to charge you more in interest and fees than the amount of the loan you took out in the first place

For a lot of payday loan companies that made their money from nasty surprise charges and sky-high fees rather than looking after customer interests, they quickly left the marketplace.

So, while there is less competition now, every company offering payday loan behaves ethically and treat customers well.

And by working with LoanTube, the deal for consumers is going to get a whole lot better. We’ll tell you how shortly…

Payday Loans – Bad Credit

Many lenders now offer bad credit payday loan to UK consumers although if you have a better-than-average credit record, lenders also want to hear from you too.

Payday loans for bad credit situations are what many of the companies in the market exist to serve. They take a much broader approach and look at you as you are as a person now rather than who you were a few years ago when things might have been a bit tighter.

Payday Loans – No Credit Check

You might see advertisements of online companies offering payday loans with no credit checks. If you’re thinking about applying to one of them, please be very careful.

Why? Because of the Financial Conduct Authority’s strict requirement on payday lenders, they have to, by law, perform a full credit check on you prior to giving you a firm answer.

There are two types of credit checks – “soft” and “hard”. A payday loan company can do a “soft” credit check on you – this might give you a “yes” in principle. However, they cannot then turn that “in principle” yes to an “actual” yes without performing a “full” or hard credit check.

There are no legitimate and licensed lenders offering payday loans with no credit checks anywhere in the UK.

Payday Loans Direct Lender

One fear that many people have about using a broker is that the amount they’re going to pay back in interest to a payday lender is going to go up because the broker has to be paid.

That’s not true and we’d like to tell you why. Every time someone approaches a lender directly, it has cost that lender money in advertising and customer support to find that applicant and look after them. Those costs are factored into your interest rate. When you choose a broker, all that happens is that the money they would have used to cover their own marketing costs is now paid to the broker instead.

If you are thinking about approaching payday loan direct lenders, there’s something else to consider. There are a few dozen payday loan direct lenders in the UK and they all have different criteria to lend money. If you fall into those categories, great – you’ll get your loan. If you don’t, you’ll be politely refused.

The problem for payday loan borrowers is that you don’t know what the type of person lenders like to lend money to. You might strike it lucky and get it right the first time. However, if you don’t and you make multiple applications to the wrong lenders, not only will you keep getting “no” as an answer but every credit search performed on you makes it less likely that a payday loan company which would actually be willing to lend you money.

Instant Payday Loans

Payday loans are normally needed in a hurry to cover unexpected expenses like the breakdown of a car, a big electrical item at home not working anymore, funeral expenses, or wages arriving late because an employer is having cash flow problems or there is an issue with your employer’s bank.

Payday loans should never be used to cover everyday expenses and they should certainly never be used to service repayments on other forms of debt. If you feel like your debt is getting out of control, a payday loan is not the right answer for you – please contact the Money Advice Service instead.

Because payday loans are needed in a hurry, most of the time, once an application has been accepted, the amount is paid into a customer’s accounts within minutes or hours.

Please be informed that Payday loans may not be suitable for you if you think you will struggle to repay the loan. If you think it’s going to be too difficult, please don’t apply for one because it will make the chances of you being able to take out loans, credit cards, and mortgages in the future much harder.

Why LoanTube for Payday Loans?

LoanTube is different – we try to bring you the cheapest possible rates amongst our partner lenders for payday loans. Although we can’t guarantee we’ll find you a lender, you really do have better chances of finding a suitable loan with us because of the reason we work with multiple lenders.

How does it work? Our clever computer system compares real-time offers made direct by payday lenders. This is all done in real-time and, once we’ve got all the quotes, we present all these offers with their terms and condition to you,as same will help you take an informed decision. And all of these at no extra cost.

To start your application for a payday loan, please click here. Remember that our service comes at no charge to you and that you don’t have to accept any of the quotes we provide you with if you don’t like them. 

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