Instant payday loans are a very useful way of plugging short-term cash flow issues until your next payday. Regulations are tighter; consumer protection is greater with fees and interest rates capped. The approval process is extremely quick, and funds could be in your bank within 15 minutes!
Applying for an Instant Payday Loan
The Internet has changed the way in which many financial services businesses operate. It has effectively opened up instant payday loans to millions of people, able to apply in the comfort of their own home or on their mobile phone.
As the average loan is for no more than £100 and repaid within 30 days, the approval process is extremely quick, and you can often have the money in your account within 15 minutes.
Instant Payday Loan Criteria
While there is a general misconception that payday loan companies rarely turn down applicants, this is not necessarily the case. As you will see from the criteria below, you will still need to provide proof of income and the fact that you can afford to make the repayments.
The criteria are as follows:-
- Applicants must be aged over 18
- Must hold a UK bank account
- Debit card details must be to hand
- Evidence of monthly income is required
- Monthly expenses must be provided
- Employers name/details will be required
- Confirmation that the individual is a UK resident
While historically, some payday loan companies had a reputation for being “reckless” the industry has changed dramatically over the last decade.
Regulations are much tighter, and there is enhanced consumer protection as well as an array of restrictions.
What Interest Rate Will I Be Charged?
As with any loan, the headline interest rate will depend wholly on the individual’s personal circumstances and their ability to pay. While the payday loan sector has a reputation for servicing those with chequered financial histories, this is not always the case; your application could still be rejected. It is also worth noting that annualising a monthly interest rate can sometimes give an unrealistic impression.
It is probably useful to compare and contrast the headline interest rates on other types of finance to put everything into perspective:-
- UK base rates 0.1%
- Additional mortgage interest rate up to 4%
- Personal loans between 10% and 40%
- Interest on bank overdrafts up to 40%
- Interest on instant short-term payday loans up to and in excess of 1500%
In terms of interest rate charged, there is no doubt that instant payday loans are the most expensive.
In actual monetary terms, the cost of a short-term payday loan is relatively small bearing in mind the average loan is no more than £100, repaid over 30 days.
There are some additional dangers on fast loan interest rates which you can read more about here.
How Have Payday Loan Regulations Changed?
Prior to the FCA (UK financial regulator) becoming more involved in the payday loan sector, there was confusion, concern and controversy. Many companies were charging sky-high interest rates; exorbitant fees and many companies used rather forceful debt recovery procedures.
There was a general lack of regulations as the sudden surge in demand for payday loans increased – probably quicker than many had expected.
However, back in 2014, the regulatory framework was modified to include:-
A Cap on Interest Rates
New regulations were introduced to place a legal limit on the interest that payday loan companies were able to charge. As a consequence, interest and fees must not exceed 0.8% of the initial loan per day.
One of the main issues in years gone by was the level of fees charged in the event of missed payments which very quickly increased the value of individual loans. Under new regulations default fees are now capped at £15.
Limit on Total Repayments
Perhaps the most helpful regulation introduced by the FCA was the cap on total repayments. Under the new regulations, the total interest and fees charged cannot exceed the value of the original loan.
The days of £100 loans mushrooming into thousands of pounds as a consequence of fees and interest have long gone.
While the introduction of the regulations has proven to be extremely useful for both consumers and the sector’s reputation, payday loans are still a relatively high-interest option.
Those who continuously roll over their loans, including interest and charges need to be extremely careful about their financial well-being.
How Do I Find the Best Payday Loan Deal?
As we touched on above, the Internet has changed the way in which financial services are promoted and presented to UK customers. It is now possible to search the Internet for individual payday loan companies, and there are also many comparison websites with useful information.
Unfortunately, using either of these options, it is not possible to cover the whole market or find the best deal for your particular circumstance. Where you are looking to secure a payday loan deal beyond 30 days, it may be useful to employ the services of a credit broker.
Independent and tied credit brokers are able to approach numerous lenders and negotiate improved rates on your behalf. When you bear in mind the relatively high-interest rates on payday loans, there could be significant potential for savings for those seeking medium to long-term finance.
Can I Roll Over My Payday Loan?
The simple answer is that in principle, you will be able to roll over your payday loan, but you would need to provide proof of regular income and an ability to cover future repayments. Payday loans are considered a short-term solution to short-term cash flow issues and are not necessarily the answer for those experiencing medium to long-term difficulties.
There is the potential for interest payments/fees to increase if you are struggling to make repayments on time and end up rolling over the loan – the principal amount will continue to increase.
If you are struggling with cash flow issues, there may be more appropriate for long-term solutions, and you should seek advice.
The instant payday loan market is now on a much firmer footing both financially and morally after the introduction of new regulations in 2014. Consumer protections have been enhanced although the onus is still on borrowers to provide proof of income and an ability to cover repayments.
The average payday loan is for no more than £100 and is paid within 30 days. However, there may be other alternatives for those looking at longer-term finance which is where the services of a financial adviser can prove very useful.
How Can Flexy Loans Help?
Here at Flexy Loans, we have partnered with some of the UK’s leading Lenders.
They have already helped thousands of people get loans already, and they can do the same for you.
Choosing a loan broker like us (we don’t charge any fees) means our application process matches you with the best loan available to you. All lenders we recommend are regulated by the FCA, which gives you an additional layer of protection.
To apply and see what loan is available to you, click on the below and answer the questions.