Payday Online

Payday Online

UK is an information site about Payday Loans. In our Reviews section you can find reviews of customer using the different payday loan providers. We would like to encourage you to leave your feedback to the providers yourself.

On all other pages we want to give you an overview of payday loans in the UK and their positives and negatives and financial implications. Also we want to introduce you to alternatives to payday loans.

A payday loan, also known as a payday advance, is an unsecured short-term loan, usually for small amounts of money. Since they are not always connected to the next payday, they are also simply known as cash advances. The consumer needs to provide payroll and employment details in order to obtain a payday loan. On this site we will mostly focus on the UK legislation, but check out our regional legislation section to learn about the wide variations between the legislation in different countries.

Payday loans are generally listed with their APR (the Annual percentage rate), however this is often subject to debate as it has been originally designed to enable consumers to compare the annual credit. Annual credit rates may not as meaningful to short term loans with a duration of a few weeks. Still the APR is the best measure to compare payday loans to each other.

For the lender, payday loans usually carry quite substantial risks – the average net default rate lies at around 6%.

How it works
In a nutshell, the consumer (borrower) in need of a short term loan, approaches the lender to obtain the unsecured loan, for it to be repaid at the next payday of the borrower. Normally the lender needs to verify that the borrower is employed or has a steady income, but there are some borrowers that skip this step and don’t run any sort of credit checks at all.

The traditional way was the retail model in which the borrower would go into a lending store to sign up for a short term loan. The borrower would then write a cheque to the lender that is postdated and for the full loan amount plus fees. At the payback date, the borrower would go back to the lending store to repay the loan in person, or the lender would cash the cheque, with additional charges due in case the cheque bounces.

The modern way of payday loans is to sign up for them using the internet. Borrowers can use comparison sites to find the best loan instantly, fill out the loan application and get the loan amount instantly transferred by direct deposit into the bank account. Loan repayments will be automatically debited from the borrower’s account at the next payday.

Payday loans explained
In the UK, the payday loans industry is growing quickly. 1.2 million people took out 4.1 million loans in 2009 and the total lending amount consisted of £1.2 billion. Average loan amounts are around £300 and two-thirds of the borrowers earn under £25,000 per year. Lenders don’t have any restrictions on the interest rates they can charge – the are only required by law to state the effective annual percentage rate (APR).

Before you apply for a loan, we want you to completely understand the process as well as the potential financial implications. Interest charges and fees vary per lender. The interest that is charged for a £100 payday loan typically lies between £25-£30 which reflects an APR ranging of 1737% to 4,214%. Some lenders might charge the borrower a transfer or processing fee, normally around £5 but this also varies per lender.

In case you can’t pay the loan back on the agreed date, the normal procedure entails that the will be renewed – this however will cause further charges with extending your loan. If you see yourself in a position that you won’t be able to pay the lender back, we advise you to call and inform the lender as soon as possible. It is possible to negotiate flexible repayment terms that might benefit you.

In general the borrower should not expect to be contacted by the lender unless you don’t pay the loan back in time. In this case, either the lender or a collection agency that has been hired by the lender, may contact you to arrange the repayment. Collectors and lenders are regulated by the Office of Fair trading and are under no circumstances allowed to act in a threatening manner.

There are some lenders that might use Credit Reference Agencies (CRAs) in order to verify your identity as well as credit situation to evaluate your application. This procedure is similar to applying for a credit card. This also entails that failure to repay may result in an adverse report to the CRA and lower your credit score. Repayments on time however can have the opposite effect and reflect a positive report to the CRA. We at CashAdvancePay always recommend to only borrow the amount that you are absolutely sure you can pay back including the fees and interest and the agreed date.
Example

Let’s say you want to borrow a loan for the amount of £50 for 30 days and you found a lender offering you 1734% representative APR. The total interest would then be £14.75 and the total amount to repay after 30 days would be £64.75 (excluding a transfer or processing fee that the lender might charge).

Charges and deposit times may vary per lender. Some lenders may mention a deposit in minutes but it could take up to 48 hours for the amount to hit your bank account – this depends on your bank and lender. Fast payday loans may charge an additional fee but you should be informed about this when you apply. Normally if your loan is approved by midday, you can expect to have the amount in your bank account on the same day.

Please note that payday loans should be used as a short-term cash emergency solution and not a long-term loan.
Missing payments will have severe consequences and may make obtaining credit more difficult in the future.

Please note that payday loans should be used as a short-term cash emergency solution and not a long-term loan.


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