card guide
Short Term Personal Loans [Part 2]
So, like million of other Britons each month, you have had an expensive month and have ended up sending more than you had originally intended to.  No shame in that.  However, you now need to get your hands on some cash quickly to help tied you over till you get your next paycheck.

In this case you have one of two possible options:

Overdraft

You can ask you bank if they will give you an overdraft on your current account.  If they agree, they will charge you a small administration fee for setting up the overdraft, or for agreeing to extend your overdraft, and will charge you interest on the overdraft.  The overdraft is than repaid when you next get a paycheck. 

Although not strictly a personal loan per se, this is one of the quickest and easiest ways of getting a short-term loan; and, also, these days it is possible to structure a long-term personal loan for a larger amount in a similar way to unsecured loans.

So, for example, if you want to buy a car, and the car is going to cost you £5,000 you can ask your bank for a £5,000 overdraft.  You then repay the overdraft in small (usually equal) amounts over a period of time until your bank account is back in credit.

It must be said, however, that while this is certainly one alternative to borrowing money, it is not normally a very attractive one for many people as the standard bank overdraft rate is usually higher than personal loan accounts.  Also, overdraft fees can be fairly hefty – especially if you go over the agreed overdraft limit at any time.

Payday loans

A boom in the short-term personal loan market in past 10 years has been pay-day loans.  As their name suggests, pay day loans are loans you arrange to borrow until your next pay-day.  Unlike an overdraft, however, pay-day loans are normally arranged with a third party. 

If you want to apply for a pay-day loan, the best place to look for deals is on the internet.  If you use any internet search engine and search for “pay-day loans UK”, you’ll find hundreds of websites pop up.  You can then read these and look for the best deal.

When you apply for a pay-day loan you will normally need to provide evidence of a pay-slip, to prove that you are working and can repay the pay-day loan, and also details of a bank account.  Unless you ask the company otherwise, the pay-day loan will be paid into the bank account you inform them of (it is possible to be paid by cheque), but, importantly, repayment of the pay-day loan will be made directly from the bank account on the day you specify (and you pay-slip evidences) is your next pay day.

Two things that you need to be aware of:  first, charges for pay day loans can be fairly high.  Second, if the charges are not high, then the interest is.  Either way, while pay day loans can be a very useful short-term borrowing options, you do not want to be budgeting your monthly expenses by including pay-day loans.  In the end, the costs will add up and if you money problems are that big, you should be thinking of other ways to get out of your debt troubles.

The final thing to say about pay-day loans is that rarely is it the case than any credit scoring will be undertaken.  There are two reasons why this is the case.  First, the loan period is too short.  Second, your pay-slip should evidence that you can repay the loan.   As such, pay-day loans become a very useful tool for those who have a bad credit rating or history and cannot arrange overdrafts with their banks

Next: Unsecured personal loans

Posted on: [ January 05, 2018 ]       Add to Del.icio.us   Digg it   Add to Blinklist   Add to FUrl   StumbleUpon