Payday / Payroll Loans

It has happened to most of us. It is the third week into the month and due to some birthdays, anniversaries, car repairs or some other problem, it appears that we have no money left and a week or so to go in the month.

One of the options many people choose to take is to get a payday loan (also known as a Payroll loan or a cash advance), which is essentially a loan for the amount of your paycheck, paid to you right away and expected to be paid back on your payday.
The way most payday loans are taken out is through a process of post dated checking. The individual fills out a check for their payday (usually the first of the month), and gets the cash for that check right there minus some fees charged by the payday loan company.

 

Benefits
When you are in desperate need of money because you have run out but have a lot of other expenses before payday, payday loans are not an awful idea. You get the loan you need now, you can use it on whatever you want. When you have a job and the only reason you do not have money at that point in time is an unforeseen expense that you did not save up for, they are not an awful idea.

Risks
However, most people should avoid payday loans, as they have several limitations. First, most payday loans are limited to a specific pound value that may not be enough to cover the cost of the money you need for the rest of the month. Various provinces have various limitations. Second, the fees are incredibly high. A £300 loan may cost £45 in fees, which equates to an APR of almost 400%. Vastly more than one would have to pay over the course of one month to a credit card company

Note: A credit card company at worst will have no more than a 27% APR. In one month, the total interest with that high credit card APR is £6.75, approximately 8% of the payment one makes to a payday loan company for a single monthly loan.

Finally, these loans are self sustaining. If you have to spend £80 on your £600 loan, that is £80 that you do not have next month. If you are living paycheck to paycheck that is a significant chunk of your finances taken out each month, and may require you to get payday loan after payday loan until you can barely afford to make any payments anymore.

Payday loans are useful if you make a lot of money but ran out because you had an unforeseen expense and have a long way to go until your next paycheck. If you are not that wealthy, you are likely going to want to avoid payday loans at all costs as these represent very significant financial investments.




 Monthly Repayment   £
 
  • Please include your total income
  • Income
    Amount ( £) Frequency
     
    Home Secured Loans Debt Consolidation Bad Credit Home Loans Personal Loans Articles Resources Contact Us