Payday loans allow you to borrow £100 to £2,500 and cover you until your next payday, when you receive your income from work. Payday loans are unsecured meaning that you do not have to put down anything as collateral to be eligible and instead the success of your application is based on being able to pass relevant credit and affordability checks. Payday Loans Hub have partnered with over 20 leading payday lenders in the UK. Provided that you meet the criteria and pass the relevant checks, our lenders can typically transfer funds to your debit account within one hour and in one lump sum.
What are payday loans commonly used for?Payday loans are commonly used for emergency purposes such as car repairs, rent, medical bills, broken boilers and other emergencies. So once you have paid for your expense and received your next page cheque from work, you can then repay the loan after a few weeks – simple. The convenience of being able to apply online through Payday Loans Hub and receive funds so quickly makes them popular to cover emergency expenses. However, one must be aware that the convenience comes at a cost, hence payday loans are sometimes more costly than your average personal loan and failing to repay on time can lead to additional fees being charged.
How much can I borrow from Payday Loans Hub?Our payday lenders can typically let you borrow between £100 to £2,500, depending on their terms. Some lenders will start with a minimum of £300 and a maximum of £1,000 – so be aware before applying. The amount you can borrow is based on several factors. Most commonly, it is based on your income and affordability. So if you have a stable employment and a healthy income, with low expenses, this will maximise the amount you can borrow. It is all about affordability, so a lot of the questions in the application form aim to see how much you can repay without falling into financial difficulty. Other checks include credit checking and those with a strong or above average credit score will be more likely to borrow the amount they have chosen, using data from the likes of Experian, Equifax and CallCredit. In addition, being a repeat customer for a payday lender shows that you have built some trust and relationship with them and therefore they can lend you more, provided your circumstances have not deteriorated. For instance, several payday lenders state that for first-time borrowers the minimum you can drawdown is £300 or £400 but once you have repaid successfully, you may borrow up to £1,000
Can I borrow from Payday Loans Hub with bad credit?Yes, we can provide specific payday loans for bad credit, however, it does depend on the criteria of each lender and the customer’s ability to repay their loan on time. According to FCA regulation, each lender must prove that an individual is fit to repay their loan and credit checks will almost always be carried out as a result. Therefore, those borrowers with a history of bankruptcy, county court judgements and individual voluntary arrangements may find it harder to be accepted. But if they have had the odd default in the past but can demonstrate a stable income, employment and low debt, they may still be eligible.
What is the criteria for payday loans?Whilst the criteria between payday lenders may vary, the general criteria for Payday Loans Hub for applying for a payday loan is as follows:
- Over 18 years of age
- UK resident or living in the UK full-time for at least 3 years
- In employment (part-time or full-time) and earning a minimum of £500 per month
- Able to afford repayments
- Good or average credit score recommended, no history of bankruptcy, CCJs or IVAs
- Not on benefits
- Valid debit card, mobile phone and email address
Why is the APR for payday loans so high?Many will be turned off by the high APR that is commonly associated with payday loans. You may have seen that the average cost of a payday loan is around 1,200% Representative APR. This is because, by law, payday lenders have to use the APR as a measure of comparison to other financial products. However, the way APR is calculated means that it is compounded again and again, so whilst a payday loan may only last a few weeks, it is multiplied several times to make seem as though it were for a year. Hence, it seems a lot more expensive than a personal loan (around 5%), credit card (around 28%) or guarantor loan (around 49.9%). For a more accurate understanding of the cost of a payday loan, consider looking at the daily interest rate which has been capped at a maximum of 0.8% per day, equal to £24 per £100 borrowed, as this gives a more accurate reflection. It is noted that the cost a loan is also presented as ‘representative’ meaning that this is the rate given to at least 51% of successful candidates and the actual rate given may vary depending on the individual’s circumstances.
What happens if I cannot repay my payday loan?Failing to repay your payday loan on time can have some serious implications and affect your ability access affordable finance in the future. Firstly, a note gets put on your credit file stating that you have defaulted on a payment and this may cause your credit score to fall. This information is available to future creditors who may be looking at your credit file prior to offering you a loan, mortgage or credit card. If they have seen that you have fallen behind on repayment, they will consider you a higher risk and be reluctant to lend to you. If the loan remains in arrears for very long and the loan is never repaid, your future access to finance may be very restricted and you may have to rely on providing extra security with a guarantor or collateral. Secondly, the cost of your loan increases when you fail to repay. Lenders will typically charge a default fee which is now capped at a maximum of £15. This is the highest that any lender, by law, can charge and is just an administration fee to cover any follow up calls and emails. Further changes are incurred by having your loan open for longer. Notably, the daily interest can continue to accrue for a certain number of days and it can be almost like paying an extra month on your loan.
Things to consider before applyingPrior to applying, there are some questions that you have to ask yourself to ensure that it is a positive experience and will cause you or your family any financial difficulty.
- Can I afford to repay? It is easy to get focused on using the money towards paying an expense, and therefore worrying about how you are going to repay it after. But the truth is that a payday loan has a lot of responsibilities and can be costly and damaging to your credit score if you do not repay on time. Therefore, it is important to budget effectively and plan how you are going to repay your loan on time and how you are going to afford it. Will it be through your regular salary? Savings? Inheritance? A bonus from work? You must have a plan.
- Have I compared rates? The cost of payday loans is typically around the Representative APR of 1,200% but it can vary depending on the lender. There has been an emphasis in the industry to help customers compare the different rates – so it is important to use the different comparison available and review the different lenders to ensure that you get the best deal and not just the one with the best name.
- Will applying impact my credit score? By applying for a payday loan, there will be an initial impact to your credit file as a search footprint is registered on your report to confirm that the lender has visited your file. This disappears after 12 months but it is important to know because having too many footprints in a short space of time can make one seem financially stretched or desperate. Therefore, one should be conscious of making too many applications too soon and instead narrowing down their choices and focusing on only one or maybe two lenders to apply with.
- Can I receive a cheaper alternative elsewhere? There are certainly much cheaper alternatives available in the payday loan industry. Naturally, the cheapest way to borrow is through a family member or friend. The money is usually cash in hand or transferred to your bank account and those close to you will rarely charge interest or even expect the money back.