786 Loans helps borrowers find long-term loans as well as short-term loans and payday loans. You don’t have to have a perfect repayment history either – it’s our job to find the best loans for your profile. In this article, we look at the pros and cons of payday loans.
What are the advantages of a payday loan?
#1 You have much longer to repay
In the earlier days, with payday loans, you have to repay the loan in full plus the interest within 30 days of taking the loan out. However, lenders have evolved over the years and, you have, usually, between 2 and 12 months to repay the money you borrowed plus the interest on top. If you want to take out a sizeable amount of money but you’ve only got a short amount of time to pay it back, you might not be able to comfortably make the repayments on time and in full to your lender because there’s no enough spare cash in your household at the end of the month to meet the cost.
With a 12 Month Payday Loan, you have up to 1 year to make the repayment. You can make a budget and stick to it so that you do not face any difficulty in repayments. Create a budget and a planner beforehand for a smooth repayment arrangement.
#2 Interest rates are normally a lot lower
Short-term loans and payday loans tend to have much lower interest rates than credit cards. The higher the interest you pay on a loan, the more it costs you in total to pay it back in full. With payday loans, the interest rate you may be offered will be a fraction of what you would be offered with a short-term loan or a business loan. However, this is not always the case so make sure you read any offer you receive from a lender carefully before deciding whether it’s the right deal for you and whether you can afford it.
#3 You can pay for your expenses
With most short-term loans lasting 12 months or less, you’ll struggle to find a lender who will be happy to give you a loan. The reason? They’re concerned that paying back the loan and the interest which put too much pressure on your disposable income. Your disposable income is what you have left from your wages after you’ve paid out everything you need to pay out for over the course of a month (like mortgage, rent, insurance, Sky, and so on). Lenders are much happy to allow borrowers to take out loans of up to £50,000 as long as the repayments are spread over a long enough time. This gives them the peace of mind that you can afford to make your repayments to them in full and on time.
What are the disadvantages of a payday loan?
#1 The longer you borrow, the more interest you pay
Although by taking out your loan over a longer period, you will reduce your monthly repayments, you’ll end up paying more for your loan over time. Let’s say that you wanted to borrow £400 over 6 months and you were charged 248.37%in interest. You’d end up paying back £734.23 in total (including interest of £122.37).
#2 Tough application process and acceptance criteria
The more money you borrow, the more risk a lender is taking. This extra risk means that it can be harder to find a company who wants to lend you the money. If you’re looking for a payday loan with no credit check, finding a loan company to work with you will be even harder. As companies which are registered by the Financial Conduct Authority (FCA) have to run a credit check to promote responsible lending.
You may need to provide more information for a short-term loan or a payday loan. It may take longer to be accepted and, therefore, longer to get your money. 786 Loans works with borrowers who want long-term loans (including short-term loans) and we know the best finance providers to present your application to.
#3 Borrowing more than you need
Because you have up to 1 year to pay off your loan, many borrowers are tempted to ask for more than they actually need. Please make sure that, before you apply for a loan, you know exactly how much you need to borrow and why. There’s no point to you in paying interest on the money you don’t actually need.
#4 Early repayment charges
Some lenders will charge you for either overpaying your loan (so that you bring the balance down faster) or for paying your loan off early. Please check a lender’s terms and conditions before agreeing to any loan for repayment charges as, if you find the money to settle your loan early, this will be an unpleasant and unexpected surprise.
#5 Account Fees
Most lenders charge you if you miss a payment or they have to chase you for payment using either a letter or someone from their own debt recovery call centre. Again, as with early repayment charges, check terms and conditions carefully before accepting a loan offer. If a long term loan is right for you, get in touch with 786 Loans.
Even though there are significant advantages to a payday loan, it’s important to consider carefully what the downside is if you have been offered one. It is always wise to shop around for the best loan so that you get a deal that’s right for you. That’s where we come in. We’re not a lender, we’re a broker. We match lenders and borrowers in seconds using our state-of-the-art computer system. We’ll contact all the lender we think you’ve got the best chance of having your application accepted and, then, we present you with the very best deal we’ve found. You don’t have to accept any offer we find for you and our service is free at all times.
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