Understanding Short Term Loan Borrowing

I think it will certainly be fair to say that there can always be a time when a person needs to borrow money. This can be down to a high amount of different reasons. Some people may then need a high amount of money as they are looking to make some form of expensive purchase of some kind. This could possibly be for a new car perhaps or maybe someone is looking to put money towards home improvements etc. There can then be others who may only need a small amount of cash. They could just need some financial help paying a bill or they need some additional funds to help make their wages last until they are next paid from their employer. Now regardless of what any person needs any amount of money for, if they have this saved they can then use it as required to pay for whatever they then need. Some people might even have enough put away through savings to pay for their requirement and need outright. Turning to savings is always nice but unfortunately it is not available for everyone and if this is then the case the money will need to be borrowed. Short term loans is just one way people use when money is needed to be borrowed.

Understanding Short Term Loan Borrowing

Understanding Short Term Loan Borrowing

When most people need to borrow money the chances are first of all they will approach friends and family to see if they can get the money this way. This will be much more common for any potential borrower if only a small amount of money is needed. They will know that doing this can often enable them the chance to take out a short term loan or any kind of other borrowing interest free. This will be great as people in these cases just pay back exactly what they loaned in the first place. People here as well can get their loans quickly and then just repay back that debt as soon as they have the required funds available again. This as a borrowing option is just like turning to potential savings as it is not available for everyone.

If people ever need money due to have a small amount of funds in need of a cash emergency for example then using a short term loan may be the better option. Some many different lenders provide these as a borrowing option. Payday lenders will most likely however, be the source that provides this finance. They aim their financial products towards people with bad credit as these are often obtained by people who have other borrowing options limited. It can often provide people with loan amounts up to £500.00 for the same people to then repay the debt over a short period of time hence the term short term loan. Never is the loan ever under any circumstances to be used as a long term borrowing option. People have to then repay back the finance within a time frame of up to twelve months.

Bad Credit Payday Loans

People may or may not know that when it comes to borrowing money most people will have a whole host of different options they can potentially apply for and then possibly take out. There can for example be short term loans where people tend to borrow small amounts for repayments then due over short periods of time, instalment loans can then be taken as an alternative and here people tend to borrow larger amounts for repayments then back over longer periods of time. Bad credit payday loans are a common type of short term loan and a mortgage is actually a very common type of instalment loan borrowing. Another common type of finance borrowing is credit cards, a high amount of people have these and they allow people the chance to pay for certain items and also people withdraw cash using them up to a set limit via the actual card itself. These three financial items are all common but they should always be explored in detail before anyone can then make a loan application request.

There can always be times when people need to gain access to money and it can be for so many different reasons. There can be people who need large amounts of cash as they are looking to make a possible one off significant purchase for items that include a possible new car or maybe even a deposit on a new house. There can be other people who just need money to help possibly tide their finances over until the next time they are paid by their employer. Now no matter what absolutely anyone needs cash for if they have the money saved then they can feel free to use this to pay for whatever is required however if that is not possible then the chances are they will need to borrow it.

I think it is always safe to assume that when people firstly want to borrow money they will approach their friends or family to get what they need. They know if they borrow money this way it will be interest free and they can just repay back the debt as soon as they have the money disposable again. If that is not the case then they will look to borrow from a lender. There can be some lenders who aim to help people with bad credit as well as normal borrowers who need money quickly. There are so many lenders out there offering finance to potential borrowers. If people have bad credit then the chances are they always find obtaining loans difficult or when they are occasionally accepted they find this very expensive as a way to borrow money. Bad credit payday loans for people with bad credit then here may be useful, they can look to quickly issue people with finance for minimal amounts even if people who are looking for loans have been rejected for loans elsewhere. For people with bad credit a bad credit payday loan may be the only way people can borrow cash when they need to.

Bad Credit Payday Loans

What are Payday Loans?

Payday loans can be described as short term loans which anyone with a stable source of income is eligible to apply for. What makes these loans popular is the fact that it is extremely easy for the loan to be approved and it caters to a wide range of people, who cannot afford long term loans. These loans are usually meant to be paid back within 2 weeks to a month with an APR (Annual Percentage Rate) that can go up as high as 1000 %.

Bad Credit Payday Loans

Bad Credit Payday Loans

The History of Pay Day Loans:

Before we dwell into what bad credit pay day loans really are, it is important to understand how this movement started. This was a phenomenon that owes its origins to the land of the US and has been a practice that was adopted as early as the 1800’s, mainly for the blue collar workers who were finding it difficult to make ends meet. This was an unregulated practice which led to dubious means of collecting money by collection agents, which called for a regulation of the industry. After several legal battles, the decision was made to not have a standard interest rate but a situation where the home state could decide the interest rate. Naturally, lenders saw more opportunity in states where the rules were more relaxed.

This practice was replicated in UK in the 1990’s and since then, has grown into a billion dollar industry.

 

What are Bad Credit Pay Day Loans?

The next obvious question one would have is who is eligible for these short term loans? Anyone who is above 18 years of age with a source of income is applicable for these loans, irrespective of the credit history of the individual. This means that even if you have a bad credit, your credit worth on the day that you apply for the pay day loan is taken into consideration and on the basis of an affordability analysis to test whether you are capable of paying the loan within the stipulated time period; your loan amount is approved.

Advantages of Bad Credit Pay Day Loans:

For those of you who don’t have a talk-worthy credit history, short term loans are the most viable option for the following reasons:

  • These financial institutions make a more unbiased assessment of your credit worth, as compared to conventional banks.
  • The application process is fairly simple and easy to understand, which makes the experience more satisfactory with the customer.
  • These institutions are also responsible for improve your credit worthiness by guiding you through the entire process and showing you proven methods of improving your financial acumen.
  • Since these institutions are linked to many banks, if you have been a bad creditor in the past and have repaid your pay day loans on time, that information is passed on to the credit agencies and in turn the banks you have been previously associated with.

Bad Credit Pay Day Loans are becoming increasingly popular in the UK and has faced staunch criticism against the practices adopted by these lending agencies. It becomes all the more important to understand both aspects to this, especially for bad credit borrowers so that they are in an informed position. There are some points one should remember in the case of Bad credit pay day Loans.

  • Before applying for any pay day loan, one needs to know the cash repayment practices adopted by the lending agencies.
  • One needs to do a thorough research on the lending agency they are opting for and this should be done through sufficient number of back ground checks, comparing reputations in the market, speaking to customers who have used these services in the past and so on.
  • It is also imperative to understand why exactly you need the loan and it is always advisable to do it only in the case of an emergency, as this should not be treated as an alternative for fast and easy cash.
  • You should do a thorough analysis of your own to ensure that you will be in a position to repay the amount fully, with the interest within the time mentioned.

 

Reason for Regulating Pay Day Loans:

It has been understood that there is a need to bring these pay day loans under strict regulation since there have been a certain degree of fraudulent practices that have been adopted by these lending agencies. It has been observed by many agencies that this, rather than becoming an emergency cash mechanism, has become a means to substitute for no cash. A recent survey showed that only 16% people used these services for emergencies. A majority of the people were using it to supplement their income.

There was another interesting fact that came out during these findings. A majority of the people borrowing from these lending agencies were requesting for an extension of their loans or rolling over their loans, giving rise to huge interest rates as well as loan fees.

Another thing that was observed was the fact that there were numerous lending agencies in the market which were not adopting fair practices when it came to educating the customer about their repayment options, their hidden costs and how they should go about building their financial credibility, which furthered the need to be well informed about these agencies that were ruling the short term loan market.

Final Words:

It is important to consider all your options before you go in for a pay day loan such as this. Although pay day loans do have their benefits when it comes to serving your needs in times of crisis, there needs to be a clear distinction that needs to be made between crisis money and replacement money. This method should not be used to supplement the cash or replace the cash that you have, and we should be completely aware about the consequences of bad financial management. Loan money has a way of piling up and it is better to clear your debt before you incur more.