Advantages and Disadvantages of Payday Loans in the UK

The UK is among the top countries who have one of the largest economies in the world. Regarding financial services, the UK has good history and experience regarding the matter. Due to their large economy, finance in the UK is s teady and is fairly stable for most of its population. Finances vary with how much a person earns. Some may have more than enough left to spare after paying for their expenses, but some more than others are lackin g the funds to meet daily costs. For this reason, people seek help from financial institutions in borrowing money to settle costs when lacking funds. Most commonly people make use of short-term loans known as Payday loans in the UK .

This type of short-term loan offers only small amounts to borrowers, with terms covering on average for two weeks or until the borrower’s payday as the name implies. Payday loans are a popular source of funds for emergencies and application is easy with fast a pprovals when certain requirements are met. Although these loans may be convenient, it comes with advantages and disadvantages. Here are among the few advantages and disadvantages of payday loans:

ADVANTAGES:

1. Easy Application – it is eas y to apply for the loan. One can apply online and through different company branches offering the service.

2. Cash is Received Instantly – when the loan application is received, amount of loan is instantly deposited into one’s bank account within 24hours after approval.

3. Doesn’t Require Credit Standing – loan applications don’t look to an individual’s credit standing as a factor for approvals.

4. Increasing Loan Amounts – as soon as a track record is established with a lender, one can gradually increase depending payback performance and lender’s set of rules and guidelines.

5. Gives Independence – applying for a loan gives a sense of independence by avoiding seeking financial help from parents.

DISADVANTAGES:

1. Short-term Loan Only – loan term is only up to under two weeks on average or until payday.

2. Higher Interest Rate and Fees – interest rate is larger compared to banks and other financial institutions. Lenders often offer a flat rate of £25 for every £100 borrowed per month.

3. Need s Full Time Employment – eligibility requires the borrower to be employed full time. Part-time workers or unemployed individuals cannot file and apply for the loan.

4. Relatively Small Amounts – loans are issued for amounts up to £294 but depends per lender.

5. May Affect Credit Rating – if loans are not paid back on time this will be noted on one’s credit rating and affect future credit take outs.

Before filing for Payday loans in the UK , one must be aware of its pros and cons. In today’s modern age managing one’s finances is made easy with many accessible, available financial services offered by many banks and other financial institutions. Short term loans like payday loans are among the popular financial products offered by different financing companies today.