Borrowing Advice - Payday Loans

By Author: David Rooney
Total Articles: 65
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Levels of Payday lending have increased sharply in recent times due to a number of factors, including high street banks not lending enough and internet lending becoming easier and more popular.

The industry has received some bad press recently, as it has been claimed that some of the APR rates charged are too high. However, looking at the APR for payday loans is actually deceptive, because this type of loan is designed to be paid back over a time period much shorter than a year. Furthermore, the higher rate reflects a higher risk of default for the lender - after all, Payday Loans are easy to get hold of - you do not need a good credit rating to get one. Just as traditional street banks determine the interest rate they charge based on the customer's credit score - a risk assessment - the payday lender does the same thing. Many people would be forced to borrow from loan sharks without the financial support provided by Payday lenders. There are many dodgy lenders out there who you need to watch out for. These are the lenders which are giving the industry a bad reputation. Responsible lenders should have all of the following: ...
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1) A Consumer credit licence which shows that they are regulated by the Office of Fair Trading and the Trading Standards Authorities
2) A Data Protection licence which ensures that the borrower's data is handled and stored securely and is not used illegally
3) A secure main stage of their application form. The borrower should look out for certificate names e.g. Thawte, Comodo etc. and look for https in the URL
4) Proper terms and conditions and privacy policy
5) An actual office address!

The borrower should check all of this before making a decision on a lender. There are reputable payday lenders out there that are not to blame for the bad reputation of their industry. PaydayPlus is one of these companies. The company allows people to deal with their money problems very quickly as when people visit their website, their details are immediately submitted to several lenders simultaneously.

Borrowers of these loans should be wise and repay the money promptly on their next pay day. As long as they do this, this type of lending can be cheaper than a credit card charge or paying an unauthorised overdraft. Payday Loans are also great if you need money immediately, however people should only borrow if they really need the money, as the interest rates are high. If you apply through PaydayPlus, for example, funds may be transferred to the borrower on the same working day (although some banks do take a further 48 hours for the funds to clear). Make sure that you know that you will have sufficient funds from your next payday to repay the loan.

Always do your research. Check for the features common with responsible lenders mentioned above and research companies to compare interest rates before deciding on one (note: some have lower rates for new customers and repeat customers). I hope this article has given you a better understanding of the Payday loans industry and a better chance of making the right borrowing decisions.