If you are looking for a means to borrow money for something like an emergency, you must have least thought about borrowing money from friends or your family. But just because you need to get loans doesn ’t mean that you have to get one. One of the loans that you need to be very wary of is the payday loans in the UK. You must’ve already heard how controversial this particular loan type is, but it is only so because the people that felt cheated did not do t heir homework. It is best that you learn more about what is a payday loan and when it is necessary to use one.
How it works
Payday loans are considered short-term loans which was primarily designed in tiding people over until their payday. The money is directly paid into the borrower’s bank account, and they are expected to be paid fully by charges and interests by the end of the month. They can also be borrowed for longer periods. Usually, it takes up to 3 months and must be repaid in installments. For this option, borrowers have the choice to go for long-term loans.
What all the loans mentioned here have in common is that they are short-term and have very high costs, and it is usually only available for small amounts.
Y ou only have until payday to pay back the money you owe from your loan plus with interest, although there are another payday loan lenders that give you the liberty in choosing a repayment method.
The reason why payday loans are very expensiv e is that they are short-term loans, wherein it is a type of loan that is most expensive. Depending on how you handle your finances, you might only be inviting more trouble and make your situation even worse with the payday loans, particularly when you can ‘t pay your loan back in time. You have to be very careful about getting a payday loan. Experts advise that they need to think about getting a payday loan carefully unless an emergency tells you that there is a need for it.
Cost of payday loans
Payday loans costs are capped according to law and under the rules established by the FCA or Financial Conduct Authority.
The rules state that it limits the number of default fees and interest that can be charged to the borrower. For example, someone that takes out a loan good for 30 days will not pay more than £24 for fees and the charges on every £100 borrowed. When the borrower can’t repay on time, the most that they can be charged by default is at £15 plus interest of the amount bo rrowed.
The overall cap here means that you do not have to pay back more than two times of what you have originally borrowed in the first place.
If you aren’t well versed with payday loans, it will do you well to conduct a research first before making your first borrow with it.