None of us want to get into money trouble, but if you have cash flow problems during the month then a pay day loan might be able to help. It is basically a very short term loan that is usually paid back when you get paid at the end of the month. They are designed to get you over cash flow problems you have encountered during the month. They are also sometimes known as a short term loan or cash advance.
They usually only allow you to borrow up to £1000 and the charges can be quite high. Typically for every £100 you borrow you can end up paying £120 back. So you should only use them in emergencies. They are useful is if you have a higher interest rate debt that needs paying off quickly. You can often get the money from a payday loan instantly.
They are assessed on an individual basis but usually if you show that you will have the money coming in then credit history isn’t taken into account. You may consider a payday for a number of reasons. A common reason is to avoid defaulting on a current account. It may be cheaper to loan money in this way rather than pay your bank charges for going into the red. It may also be an option if there is a large unexpected expense, such as car problems or house repairs.
This type of loan should not be considered as a long term lending solution. People are sometimes tempted to keep the money for longer than a month, due to how easy a payday loan is to arrange. This can lead to very high interest charges though. To arrange a payday loan you usually only need a bank account with a debit card and a regular wage. Sometimes you may be requested to provide bank statements, pay slips and proof of identity and address.
There are many providers out there so be sure to shop around before deciding who to go with. Many of the popular comparisons sites (e.g. moneysupermarket.com) will allow you to compare payday loans. Remember these should only be used if there is no cheaper alternative and you need the money quickly.