English media has been vilifying online payday loans because of the high interest rates they charge. But, there is no denying the fact that these loans are quite easily available. They come in handy for people who are in need of some quick cash that they cannot otherwise borrow from banks and traditional lenders.
Loan Statistics in the UK
In the United Kingdom, the average size of short-term loans is around £260 with a maximum monthly interest of £24. This is an expensive way to borrow a small amount of cash, even though caps are in place to limit the amount of interest that lenders can impose.
How Do Online Payday Loans in England Work
An online cash loan is just like a regular payday loan, except that application and the rest of the process are done online. The loan is designed to be repaid over a short period of time, usually between a month and three months. Staggered repayments are done during paydays, hence the term.
Loan proceeds vary from £50 to £1,500, depending on the borrower’s eligibility. What makes the loan very attractive is that it even people with no to little credit history, and even those with bad credit can be eligible to borrow. This is why the interest rates are higher than banks and traditional lending institutions. The Financial Conduct authority categorises online payday loans as “high cost”.
Advice Before Applying for a Loan
A sound advice is to avail of a payday loan, or any type of loan, only when it is necessary. As much as possible, save to build an emergency fund that you can use for unforeseen expenses.