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Everything you need to know about payday loans UK

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Payday loans are short term loans that support an individual’s cash flow during tough times. Although they are easy to obtain, the interest rates associated with these loans are high. But in recent times, when survival has become very difficult, thanks to COVID-19, more and more people in the UK are considering taking out payday loans to meet their daily needs. Payday loans are considered the last resort when looking to borrow money. Still, a payday loan can help keep you afloat if you’ve recently lost your job or your business has put you on leave.

But, before you take out a payday loan, you should try to learn as much as you can about how payday loans work, how to get one, and what will happen after you get one. Since they are readily available on many websites and big box stores in the UK, it is common to feel overwhelmed as to which to choose.

To help you out, we’ve created a comprehensive guide where we’ll discuss everything you need to know about payday loans, including how they work.

Let’s go right in.

What is a payday loan and how does it work?

A payday loan assumes that you are in desperate need of quick cash, which you will need to pay off on your next payday. In tough times when you have no other option, payday loans come in handy. At first glance, a payday loan works the same as any other loan. You will visit a financial institution or website, complete the loan application, and if the lender approves it, the money will go into your account. However, this is where the similarities end.

In the case of a UK payday loan, you will have to repay the loan quickly, basically within 30 days or your next payday. In other words, once the client receives his salary, he uses it to pay off the entire payday loan. Usually the loan amount is lower and the amount is around your monthly salary. But, you can also take a larger sum if it is so urgent. However, be aware that taking out a huge payday loan can trap you in a cycle of debt. So it is important to do your research and do your due diligence before finalizing a lender, to shop around for the best deals at the cheapest fees, here is a good review of the best payday lenders in UK.

If it’s a large amount, paying off the loan all at once could inevitably leave you in trouble the following month. In some cases, people take out another payday loan to manage their expenses. So shop around to find the best deals.

Payday loans are very short term loans repayable within 1 to 2 months.

Why are payday loans so popular in UK?

The main reason that payday loans are so popular is that they are often quick. This type of loan is approved the same day and the money is deposited into your account within the first few hours of approval. Compared to other types of loans, the approval of which can take weeks or months, payday loans offer a quick and easy solution to an emergency.

Lenders are also keen to help people with loans in the current situation where people have lost their jobs, the economy is down and there is no clear picture of what our future will be. That being said, your lender might agree to temporarily suspend or reduce your payments.

What if I can’t repay my payday loan because of COVID-19?

You can get help if COVID-19 made it difficult to pay off the payday loan or to pay off something you bought on loan like furniture, appliances, a car, etc.

You may be able to suspend or reduce your payments. Additionally, you might be able to stop taking back something that you bought on finance.

You can contact Credit Union if you cannot repay the loan. They will help you manage your late repayments by:

  • Help you set up a repayment plan to pay off what you’ve borrowed
  • Stop adding interest rate to the loan for a limited period of time
  • Suspend or reduce your payments for a limited time

Things to consider before taking out a payday loan

There are several factors that you should consider before taking out the payday loan. If you want to make a smart purchase, here are the best practices to follow:

  • Look for the best deal and be sure to compare the deals with each other
  • Find out if the lender gives you an overview of the loan you are taking out, such as its features and benefits
  • Find out what the late repayment procedure is if you are unable to repay the loan on time

Final words

Payday loans are proving to be the go-to financial aid people are taking in the midst of the pandemic. Buy only from a trusted lender and read the loan terms and conditions before signing the agreement with the lender.

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