Has your car broken down unexpectedly? Need money to pay for emergency medical bills? These are just a few common examples of situations where you might need to come up with finances on short notice. But where will you get the extra cash when all of your money is budgeted for, or you don't have enough to cover the sudden expense?
In these circumstances, you have several options to choose from and one of them is getting a Quick Loan. Quick loans such as Payday Loans are an easy way to obtain short-term credit, and can help to bridge the gap between your financial crisis and your next paycheque.
If you are considering applying for a Quick loan, make sure you know what you're getting yourself into. They may seem like a convenient solution to your short-term financial need, but they may also land you in big trouble.
Below are the top things to know about Quick Loans. For more information, check out Quick Loans: A Comprehensive Guide.
Quick loans in the UK are available to anyone over the age of 18 and with a steady flow of income. Income doesn't necessarily have to come from employment, it can also be from government benefits, alimony etc. Lenders require that you submit copies of your bank statements, income reports, benefits rewarded and so on during application.
Always check you eligibility chances before applying. Use an eligibility calculator such as the one available at Money Saving Expert
Do I require collateral?
We’ve all heard stories of lenders seizing the assets of someone who was unable to repay a loan. With some forms of Quick loans such as Payday loans, you are not required to put up your personal property as collateral, so you don't have to worry about this happening to you. However, you will have to show evidence proving your ability to repay the loan on time.
How long do I have to repay?
As the name implies, quick loans are a type of short-term credit. Borrowers are required to pay back the loan over a term of a month or up to a year depending on the loan agreement. Payday loans have shorter repayment periods (2-4 weeks) and are typically settled in one instalment.
Quick loans are significantly more expensive than other short-term loans and carry high-interest rates. For example, most Payday loan lenders will charge approximately £25 for a £100 loan, which means you will repay a total of £125. When applying for a Quick Loan, make sure you're clear on exactly how much you will be repaying.
In addition to interest, it’s common for lenders to include some hidden fees. Be sure to read all terms and conditions. Don’t just skim through and sign, or click agree if you are applying online. You are likely to discover hidden charges in the T&Cs.
How much money can I borrow?
Most lenders provide payday loans of amounts ranging from £100 to £2000. A few are willing to offer £5000 in special circumstances. Borrow only what you need. The bigger the loan, the more you'll pay.
How long do Quick Loans take to process?
Quick loan applications are processed very quickly. They are often advertised as "instant" and for amounts less than £500, processing usually takes less than hour. You can apply for a Quick Loan online, or with a single visit to a lending agent.
Part of the reason processing takes such a short time is because many lenders don't perform credit checks, which can potentially delay your application approval. If you are actively employed and hold a bank account, you can expect a quick approval.
The Quick loan trap
It is not uncommon for people to take out Quick loans and pay them off in time, but soon after realise they don't have enough money left to cover their other expenses. Most of these people end up taking out another Quick loan. Avoid getting caught in this debt cycle. Learn how to better manage your finances and start saving.
What happens when I'm unable to pay?
When the money you borrowed is due, lenders will automatically withdraw the funds directly from your bank account. If there are no funds in the account, or not enough to cover the whole amount, they will use other tactics to recover their money. If a friend or family member has helped you to repay a loan in the past, they will repeatedly try to take money from their accounts to cover the money you owe. You will also incur a late payment fee in most cases.
As soon as you realise you will not be able to keep up with repayments, get in touch with your payday loan lender and try to arrange a repayment plan with them.
Strict lending policies make it difficult for those with a blemished credit history to qualify for other types of credit, and Quick loans may be the only option for them. But if you have a choice between credit card or quick loan, it may be wiser to go with a credit card cash advance. Cash advances are cheaper and repayment is flexible.
BOTTOM LINE: Quick loans can be a godsend in some emergency situations, but can also harm your finances and credit rating if you are unable to pay back in time. Instead of panic borrowing and taking a high-interest payday loan, try considering cheaper alternatives.