They are not long term finance and are usually offered to people who for whatever reason cannot get credit from more mainstream lenders such as high street banks and loan companies.
These can often be self-employed with no accounts, people with low credit scores or no track record of credit.
The global recession has made credit much harder to obtain and transferred a whole new group of the people into what is called 'the sub-prime market', i.e. those considered a potential credit risk.
People who maybe only a year ago would probably have had no problems in getting accepeted for credit at a normal bank are now finding themselves turned away and only people with first class credit files are being accepted for cheap finance.
So what do you do if the car breaks down mid-month or the central heating boiler blows up in the middle of January and your bank won't extend your overdraft?
Well a Payday loan may be the answer.
The payday loan companies are much less stringent in terms of their selection criteria and in return they charge a much higher rate of interest.
Generally as long as you have a card payment facility on your bank account the payday loan companies will give you an loan in cash of up to 750 repayable in full on your next payday.
Sometimes these payday loans can be extended by payment one month's interest.
Are these types of loan very expensive? Yes they are, if you compare to a bank or credit card loan rate but they are not intended to be used for long term finance and have to be viewed differently. Often having a lack of funds may cause your regular monthly payments to fail so charges are applied by your bank and also from the payee and these together can add up to much more than the payday loan interest.
If you are thinking of applying for a loan till payday then you need to be sure that you will be able to repay not just the loan but the interest as well out of your next salary cheque.
Consider if there is any other possible way of solving your problems open to you, a loan from a friend or relative?
If you decide to go ahead with your payday loan application most of the payday loan companies will have the loan credited to your bank account on the very same day.
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