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Meet David

David needed to borrow £180 until his next payday.  He applied online and got his money within an hour.  David repaid his loan when he got paid 28 days later at a total cost of £225.

Representative APR 1737% (variable*)

Instant payday loans — a boon in a financial emergency

Payday loans, defying all criticisms from multiple quarters, have grown in the United Kingdom at a whopping rate of more than 400 percent in the last four years. Obviously, the figure points at the growing popularity of instant payday loans. Payday loans are especially useful for a financial exigency. Payday loan organisations lend cash quickly and the approval process is transparent, fair and hassle-free for borrowers. Swift and hassle-free loan approvals are hence, the unique selling points of a payday loan organisation. Payday loan customers have attested to the tremendous utility of payday loans in quickly addressing such financial emergencies as unpaid medical bills and rent. Also, if repaid within the agreed time, payday loans can be less costly than almost any other long-term loan.

Why is an instant payday loan the popular choice for borrowers?

A payday loan is a short-term and an unsecured loan till the next payday of the borrower. A payday loan is specifically designed to quickly fulfil the requirements for a relatively small amount of cash (payday loan organisations lend as low as £100). A lender typically charges a fee for the loan and the applicant needs to repay the loan along with the fee by the agreed deadline. Depending on the agreement between the borrower and the lender, the borrower can repay the loan either by a cheque or by allowing the lender to directly withdraw the amount from the bank account. Typically, along with the loan application, the borrower also needs to produce specific documents (type of documents may vary depending on the requirements of the specific lenders) such as a bank account statement and an employment proof. However, the documentation requirements are usually easy to fulfil and loan approval process is quicker than that in a regular financial institution.

What do instant pay day loans offer that standard payday loans do not?

• A payday loan can quickly address financial emergencies

Often, there could be situations (such as unpaid bills, rent or any other financial emergency) when the need for some quick extra cash could arise. A bank, mainly due to its rules and regulations or lengthy processes, may not be able to quickly address the need for cash. An instant payday loan is approved relatively quickly and the borrower usually receives the cash on the day of application. Reputed lenders are even known to lend cash within 15 minutes of application approval.

• A payday loan approval process is convenient

A borrower does not need to specify the reason for borrowing cash. An application supported by stipulated documents is just enough to secure the loan. The borrower can utilise the cash for any purpose — no questions asked.

• Borrowers do not pay the Annual Percentage Rate (APR)

An APR is calculated on an annual basis and since the maximum tenure of a payday loan is four weeks usually, borrowers do not need to pay the APR (assuming that the loan is repaid within four weeks). Consider this example: the fee for a payday loan of £400 is £15 per £100, and the loan is repaid within four weeks. In this case, the total repayment cost of the loan will be £460. Now, the total repayment cost can drastically increase, if the APR is applied. Hence, though government stipulations require lenders to state an APR on the payday loan agreement, the borrower effectively does not pay the APR on the payday loan. Put simply, a payday loan, without APR, is less costly than long-term loans.

• Payday loans are safer than other loan types

Payday loans do not require a borrower to provide any kind of guarantee (for example, a property). Hence, there is no risk of losing a property, in the event of a loan default. For just about every other loan types, a borrower must provide a guarantee.

• Borrowers are saved from criminal lenders

Payday loan organisations are legally authorised to lend and they abide by Government rules and regulations. Obviously, payday loan terms and conditions are fair and transparent. Payday loans have saved many a borrower, in need of quick cash, from approaching criminal lenders. Needless to say, criminal lenders charge an exorbitant fee for every penny they lend and can use illegal means to recover the loan amount. Credible studies have, in fact, found that the number of property crimes have decreased in areas having payday loan organisations.

• Low default rates

There are two main reasons for low payday loan default rates — proper borrower verification and relatively small loan amount. Payday loan organisations, just like any other financial institution, thoroughly verify the credentials and repayment capacity of an applicant. Based on the findings, payday loan organisations either decline the application or reduce the loan amount. Also, the higher the loan amount, the greater is the risk of a default.

How to be approved for an instant payday loan?

Payday loan applicants need to:

• Be at least 18 years of age
• Be in full time employment
• Own a UK bank account (has to be in same name of applicant)
• Be a British resident

Detractors of payday loans observe that lenders make substantial profits at the expense of desperate and unsuspecting customers. Payday loans are also criticised for their unbridled interest rates. The criticism regarding high interest rates of payday loans is without substance because a typical payday loan does not calculate the repayment cost on the basis of APR. See payday loan FAQ for more info.