Nicholas Hunt is a contributing writer to the 1Stop Finance money news and advice site, where you can read a longer version of this article on payday loans in the cash advance section.
While payday loans have long been popular in the USA, they are a relatively new service for UK customers, and many people aren't sure exactly what they are. With all the controversy over whether they're a worthwhile service or simply a form of legalised sharking, it's a good idea for any UK resident thinking of applying to know exactly what they're getting into.
Most of us struggle for money towards the end of the month to some extent, and have to tighten our belts a little by cutting down on socialising or other forms of non-essential spending. This is a perfectly normal (if annoying!) fact of financial life for most of us who are employed and get paid once a month. Sometimes however, running out of money can be more serious than this if there are essential expenses to be paid such as an unexpected bill or repair cost.
Many people use the overdraft facility of their bank accounts to give them a bit of leeway when funds are short, but in today's world many people are permanently overdrawn and near their limits, so this may not be an option.
An alternative way of tiding you over until your next salary is to use a credit card, both for purchases and cash withdrawals. There are several problems with this, including the fact that credit cards are an expensive form of borrowing, and it's tempting to build up a large balance which can have a disastrous effect on your long term financial health.
If neither of the previous two options are right for you, then a payday loan may be worth considering. Briefly, these loans are available to nearly everyone with a bank account and a debit card, and who is in regular employment. When you take one out, the lender will transfer the amount you ask for directly into your bank account, usually within 24 hours of your application being approved. During your application you will have supplied your debit card details, and the loan company will use these to automatically repay your loan on your next pay day, along with their fees.
And therein lies one of the main problems with payday loans - the fees.
This kind of credit is notorious for being expensive, and eye-watering APRs of 1000% or even much higher are the norm. These APR figures are perhaps a little misleading, as the APR system is designed for credit with a longer repayment period than payday loans where the term is measured in days rather than years. Nonetheless, these loans are pretty expensive, with a fee of 25% of your loan amount generally the going rate.
The second major problem is that repaying your loan and fee is likely to leave you skint again at the end of next month, and it's easy to get into an expensive vicious circle of taking out a loan every month - which is when those high APR rates will really bite.
So, is there any point to a payday loan? Yes, but only really for a genuine emergency where there isn't an alternative. If you're using these loans to finance your day to day life, then it would be better to examine your finances and see where you can economise, or to restructure your debt using a consolidation loan or similar to free up some extra cash every month.
- Related Articles
- Related Q&A
- Payday Loan Cash Advance Exposed
- The Average Profile of Customers Opting for a Payday Loan Cash Advance
- No Fax Payday Loans Cash Advance: Avail Instant Cash Without Paper Work
- Online Personal Loans Payday Loans Cash Advance: Ideal Solution for the Emergency
- Your Payday Loan Cash Advance Will be Transferred Into Your Bank Account Within Hours
- Payday Loans Cash Advance – a Step Advance in Your Life
- 1000 Payday Loans Cash Advance: No More Hurdles for the Borrowers
- Online Personal Loan Payday Loans Cash Advance: Quick Reliever of Problems




Debt consolidation Loans-Relief from debt problems in quick manner
By: Baidehi Creeper | 15/11/2009Looking for a perfect answer to get rid from all the debts? Debt consolidation loans are meant for the applicants who are messed up with innumerable debt problems and finding a suitable way out. However, these loans offers required finance and help you to pay off your unpaid debts soon and also prevent you from further debt problems and bankruptcy.
What You Should Know - Pros and Cons to FHA Loans
By: Mick Bernard | 15/11/2009FHA loans have been helping people become homeowners since 1934. Maybe this government program can help you purchase the dream home you always wanted. Financial instruments come and go with the economic environment, there has been a shift in which kind of loans new home owners are applying for. There has been a new shift with FHA loans which are more popular now than they have been in a few years. With rates and credit being tightened, they are asking for larger down payments, which consists
Payday no fax-Obtain Required Money Till Next Paycheck
By: Jo Mark | 15/11/2009You need short term financial assistance but lots of faxing hassles makes you anxious every time you think for a loan? Now, leave all the financial worries behind and grab easy and instant additional money by applying with payday no fax without any faxing hassles.
Cheap Car Loans-Place your car and get quick money
By: Terry Bock | 14/11/2009You have a car and are ready to place it as collateral? You don’t have adequate money and need a loan for emergency purposes? Afraid to avail a loan help because of paying high interest rates? Now leave all the worries and apply with cheap car loans for instant fiscal aid. These loans are designed for the people who need urgent money and have your own car to place as security.
Instant same day cash loans-Manage your cash troubles instantly
By: Hill Steve | 14/11/2009You can wait more of the days to pay off your uncertain expenses? These are crippling on your head and eating up your mind because of no cash in hand? Get applied with instant same day cash loans for urgent financial help at your doorway. These loans help you to overcome your financial problems without any hindrances and following complicated formalities.
Instant same day cash loans-Manage your cash troubles instantly
By: Hill Steve | 14/11/2009You can wait more of the days to pay off your uncertain expenses? These are crippling on your head and eating up your mind because of no cash in hand? Get applied with instant same day cash loans for urgent financial help at your doorway. These loans help you to overcome your financial problems without any hindrances and following complicated formalities.
Free Bad Credit Debt Consolidation Loan –Quote to reduce extra burden
By: Robart Watson | 14/11/2009Bad debt loans those may help you to reduce extra debt burden right away.
Instant same day cash loans-Manage your cash troubles instantly
By: Hill Steve | 14/11/2009You can wait more of the days to pay off your uncertain expenses? These are crippling on your head and eating up your mind because of no cash in hand? Get applied with instant same day cash loans for urgent financial help at your doorway. These loans help you to overcome your financial problems without any hindrances and following complicated formalities.
Face Up to your Debts, They Won't Go Away
By: Nicholas Hunt | 10/08/2006 | Debt ConsolidationHaving debt problems is a stressful and sometimes scary experience, and it's tempting to ignore the situation. Facing up to your debts is the first step to getting back on an even keel.
8 Easy Routes to Cheaper Car Insurance
By: Nicholas Hunt | 14/07/2006 | InsuranceCar insurance is an expense that no driver can avoid, but there are some simple ways to reduce the cost as much as possible. Try these 8 ideas to see how much you could save.
Payday Loans : For and Against
By: Nicholas Hunt | 11/07/2006 | LoansPayday loans are a relatively new service for UK residents, and with all the controversy surrounding them it's a good idea to know what you're getting into before you apply. This article sheds some light on the subject.
Getting a Credit Card with a Bad Credit Rating
By: Nicholas Hunt | 26/06/2006 | CreditPaying by plastic is becoming ever more common, not least because of the rise of online shopping. How can people with poor credit ratings get approved for a credit card?
Is Credit Card APR All That Counts?
By: Nicholas Hunt | 15/06/2006 | CreditChoosing a credit card isn't simply a matter of going for the one with the lowest APR interest rate, you need to match the card to the way you spend. Getting it wrong can be costly, so how do you decide which type of card to apply for?
8 Easy Tips for Cheaper Home Insurance
By: Nicholas Hunt | 08/06/2006 | InsuranceHome insurance is a necessary expense for most of us, but that doesn't mean we have to pay over the odds. Try these eight simple tips to see how you could reduce your premiums.
County Court Judgements Explained
By: Nicholas Hunt | 07/06/2006 | FinanceCounty Court Judgements or CCJs will have a serious impact on your credit rating, making it more difficult to obtain finance. What are CCJs, and can you do anything about them?