Payday loans are small sums of money you can borrow for up to a year at interest-bearing rates that are normally paid back over the course of several paydays. The average loan amount is between £200 and £300, and loan amounts are often less than $1000.
This is so because payday loans are made to aid with unforeseen, unexpected costs that frequently total only a few hundred dollars or less. They are well-liked because they serve a wide range of customers and it is nearly impossible to acquire a loan for a comparable amount elsewhere.
Such payday loans for £50 available from Loan Pig are a form of high-cost short-term lending that is sometimes referred to as short-term loans and same-day loans. All authorised payday lenders in the UK are governed by the Financial Conduct Authority (FCA).
Alternatives to payday loans
There are several borrowing choices available on the market right now, but not all of them are open to everyone, nor are all forms of credit appropriate for all uses.
Key points of comparison
There are a few things you should think about and compare across the market whether you are torn between a few borrowing options or you are just doing some background study on the various sorts of credit before applying.
How much the credit costs?
All lenders will list their APRs on their websites, but because borrowing periods might change and an annual percentage rate may not be appropriate, this information is not always helpful when comparing loans and credit products.
Comparing the APR can be useful when comparing products with similar loan terms, but in other cases, it might be simpler to evaluate the real cost of the credit.
Finding a borrowing option with flexible payback terms may be something you want to consider depending on how long you want to borrow.
For instance, a fixed-term loan like a payday loan can be appropriate if you only need to borrow a modest amount of money for a few months because the repayments will probably be affordable in the near future.
A credit card or credit line with the choice of minimum payments could be preferable to any bank loan, which will have tight repayment requirements each month if you need to borrow a significant amount of money. This is because minimum payments on a credit card or credit line are optional.
Early repayment options
Similar to repayment flexibility, you might also want to think about whether it would be a good idea to have the option of repaying the credit early.
This is not something you need to think about for running account products (like credit cards, credit lines, and overdrafts), as you can always pay the entire balance back.
If you are able to repay the loan in full even before the loan term expires, or even if you simply want the option, you must check the terms and conditions of the lender before applying. With loans, it might be more difficult.