Payday Loans On The Increase

Payday loans came over to the UK from America and have been here for quite a few years now. The number of people who use them has increased from just over 1,200,000 in 2006 to just over 4 million in 2010. Some experts also believe that their uptake will triple again over the next three years, mainly as a result of the tightening of criteria by the banks, and the high levels of personal debt in the UK.

A payday loan is essentially a short term lending facility offered by a lender that allows you to borrow quite small amounts of cash until your next payday. The money can be deposited into your account usually within 24 hours and is usually used as an emergency fund emergency for sudden unforeseen situations, such as car repairs, unforeseen bills etc.

It is a relatively easy process to get a payday loan. To qualify you need to live in the UK have a verifiable income from a full time job, and be over the age of 18. Pretty simple really.

As previously mentioned, a payday loans is for quite small amounts of cash. First time borrowers usually only get approved for loans up to about £350. However, customers who have paid off a loan previously and return for another one could get approved for a loan up to £750, even £1,000 with some lenders.

Because the lender is aware that the size of the loan is directly related to the borrowers income, there is not much risk where the lender is conserned. This allows people with a poor credit history to obtain a payday loan.

So why are payday loans getting so much bad press? As a result of the loan being short term, often only for two or three weeks, the APR (annual Percentage Rate) can seem to be very high. It may well cost you £20 to borrow £100 for a week or so. Certain bodies have picked up on this and are now calling payday loan lenders everything under the sun calling it daylight robbery and saying that payday lenders should be banned.

But if you need a couple of hundred pounds in a hurry, say for car repairs so you can carry on getting to work each day, where do you turn? Use an unofficial overdraft at your bank? Well at current rates, one well known high street bank charges £5 a month and a daily fee of up to £25 for an unauthorised overdraft. So who is worse?

Payday loans are useful for short term instant cash loans until the pay cheque comes in and are certainly cheaper than an unauthorised overdraft, but they are not suitable for longer term credit.


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Steve Smith has worked in the UK finance industry for a great many years and writes for www.PayDayLoanArranged.com, to read more of his articles visit http://www.paydayloansarranged.com/information/