Is Payday Loan A Viable Option?
In a fluctuating economy, payday loans are a godsend to those who need quick cash
to tide them over for an emergency expense until they receive their next salary. However, this method of funding has not been free from criticism. It is a fact that these loans are costly in terms of APR even if the cost of lending small amounts ranging from 80 to 1000 is high. Another issue is a majority of borrowers tend to keep going back to borrow. Even though there is a lot of information about the pros and cons of these loans to educate users about the risks involved, the convenience is too attractive. This source of cash fits in comfortably with other short term options like bank overdrafts and credit card borrowing.What makes UK Payday loan borrowers unique?
The overall profile of the borrower in UK is different from the rest of the world. The average age is adults under 35 years, usually single, unlike in the US where they are older and have families. For many short term borrowers, new payday loans or instant loans are a viable option as they have a positive experience with the arrangement, especially when the loan is paid off within the specified time. This eliminates the long term issues of debt. In spite of this, there are borrowers who have misgivings about approaching a lender, usually for these reasons: they are put off by the cost and they are embarrassed to seek a lender.
When is a new payday loan feasible?
For those with low income, payday loans can lead to a negative experience, It is not a feasible option when they:
Fall into the habit of rolling over the loan
Take too many loans on a regular basis.
Juggle multiple loans with more than one lender in the same timeframe
This leads to emotional stress and deeper debt. However, there are situations when these loans are more advantageous than other funding options. Two significant plus points are:
They can work out more cost-effective than bank overdrafts, which also carry the uncertainty of not being granted.
There is the ability to control the amount borrowed, ranging from 80 to 1000.
Most lenders practise responsible lending where they make an affordability assessment with new borrowers. If the borrower needs an additional loan, they repeat these assessments. Lenders also take the following steps:
Pose a restriction on the number of times the borrower defers a loan Monitor the number of times repeat loans are applied for
Interact with the network of lenders to make sure the individual does not take multiple loans.
Since there is no collateral involved besides the borrowers salary cheque, taking these precautions strengthen the lenders position.
UK Payday loans are also viable to those who are wary about applying for a new financial product like a credit card or bank overdraft which might turn into long term debt. In this scenario, a new payday loan offers a quick and temporary solution to a financial problem that can be made good when the next salary cheque arrives without further hassles. These borrowers are confident in their ability to repay a quick cash loan and appreciate the option to deal with their funding needs privately and confidentially without approaching friends and family.
The process is anonymous with very little paperwork and gives the borrower access to funds almost instantly, usually on the same day the application is made. Many lenders accept online applications and offer instant approval, no questions asked.
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