Payday Loans

Payday loans are a type of short term loan that allow you to borrow money before your next payday. The maximum length of these are usually a month. If you think this is a better option for you, rather than an instalment loan, here are some things to think about:

Why Payday?

Payday loans are an option to cover any unexpected circumstances or unforseen expenses, often when you need cash fast. You can apply for most payday loans online and the application process is short and simple. For those who feel they have bad credit, payday loans are a chance to take out credit and add to their credit footprint. This can help build your credit score.

Payday loans are usually for smaller expenses, as it would probably be difficult to repay a large amount in one lump sum. If you have an emergency dental bill, for example, it's unlikely that you'd have saved up the money for this sort of expense. A payday loan would let you pay for the bill, and then pay back the loan - usually your payday.

What's The Difference Between A Payday Loan And An Instalment Loan?

Short term loans cover both instalment and payday loans. Instalment loans are usually for larger expenses, and you pay them back over a longer period to make it easier. This is typically over the period of a few months. With PiggyBank instalment loans, you can borrow up to £1000, for up to 5 months.

Payday loans are for smaller costs - with a PiggyBank payday loan, you can borrow between £100 and £400. You can borrow the money for 7 days to 35 days. A payday loan is intended to cover unexpected expenses that could happen throughout the month, and you don't have the funds until you next recieve your wages.

With both a payday and instalment loan, as interest is applied daily, you can make early repayments and save money on interest. PiggyBank won't charge you extra for this - we know that some loan companies do.

What Are The Benefits Of A Payday Loan?

If you have an unforeseen expense, and don't have the money saved to pay for it, you may have a few options available. Most people would rather not ask to borrow money from friends and family, as it can be an embarrassing topic to bring up, and knowing the person you owe can be awkward. Your family and friends may also not be in a position to lend you money, even if they wanted to.

For those with a good credit history, you may have the option of taking out more conventional credit, like a bank loan. The problem with this is that you may end up borrowing far more than you need - banks don't generally offer small loans. You'd then have to pay back much more in interest. If you use your bank overdraft, it could also end up costing more, as overdraft fees can be more costly than a short term loan.

Credit cards can be a good choice for some people - you can find out more about the pros and cons on the Money Saving Expert website. If your credit history isn't fantastic though, the only credit cards you may be eligible for will probably charge you far more in interest and fees than most on offer, as there is more risk involved in lending you money.

The benefits of taking out a payday loan include the fact that they're extremely flexible - you can typically choose your amount in increments of £10, so you can borrow the amount you need. You also know exactly how much you'd be repaying, and they can work out to be much cheaper than going into your overdraft and getting bank charges.

If you need quick cash for an emergency, you'd almost certainly get a same day loan with a payday loan. Most lenders like PiggyBank aim to pay out within an hour of approval, and it may be even quicker.

Payday loans can also be the best solution for people with poor credit history. As banks tend to lend larger amounts - up to around £50,000 - it's a much bigger risk to lend to those with bad credit than payday lenders. PiggyBank, for example, offers up to £400 for a payday loan. Making payments early or on time can also build up your credit history and improve your credit rating.

Payday loans still have a bit of a bad reputation, especially as some lenders offer no credit check loans. We conduct credit checks at PiggyBank, as we make sure we are lending responsibly. We do also look at other factors though - we understand that nobody has a perfect credit history. We'll only lend to people who can afford to make repayments without putting themselves in financial difficulty. If you think that you may need to discuss your financial situation, you can get help and advice from companies like the Citizens Advice Bureau.

Can You Apply For A Payday Loan With Bad Credit?

If you're looking into payday loans, bad credit could hold you back. Your credit history stays on your credit file for 6 years, so if you paid a bill late, or missed a payment on your credit card, even if it was years ago, some lenders won't lend to you.

There is no such thing as guaranteed payday loans for bad credit. Not all payday lenders will offer you a loan if you have poor credit, but at PiggyBank we understand that nobody's credit file is spotless, and won't just look at yours when making a loan decision. We'll also look at your income and expenditure, as well as your employment situation. Our Underwriting Team will undertake additional checks and look more at your recent credit history than any missed payments that happened years ago.

If you're unsure what your credit rating is like, you can look at yours for free with companies like Noddle. If you've got good credit, you'll have a higher credit score.

You may have a low credit score that isn't due to missed or late payments. If you haven't taken out much credit before, you may have a 'thin credit file', which simply means that there isn't a lot of information in your credit history. Lenders can't see if you're good with credit, so they may be less likely to lend to you. At PiggyBank, you can still apply for a payday loan with a thin credit file, and we'll consider each application individually.

It could be tempting to search for payday loans with no credit check, but responsible lenders like PiggyBank will conduct credit checks to make sure you can afford the repayments. We would never want you to put yourself into financial difficulty by borrowing.

Direct Lender?

When looking at instalment loans and payday loans, direct lenders and brokers have to let you know which one they are. It's important to check if you are borrowing from a direct lender like PiggyBank, who would pay you the funds directly. A broker would pass your details on to a direct lender and could charge you fees for their service.

You can also compare lenders for payday loans through sites like money.co.uk. These comparison sites will only show you direct lenders. Another thing to consider when choosing the right lender is the reputation they have. Companies like Wonga have not always had good press, but the best way to find out more about a lender is by looking at their reviews from customers. This should give you a more accurate reflection.

Responsible Lender?

If you're looking into payday loans online, and think you might have bad credit, it can be tempting to apply for a loan that doesn't conduct full credit checks. This could mean that the payments are not really affordable and it could place you in further debt. At PiggyBank, we take responsible lending seriously, which means that we go through credit and affordability checks. We want to make sure we are lending responsibly.

These new regulations mean that you'll never have to pay back more than twice what you borrowed, short term loans can charge no more than £15 in fees and charges, and the daily interest applied can't be more than 0.8%. Every short term lender also has to tell you the amount you will be paying back and the dates, before you take out the loan or even sign the agreement.

It's also essential to consider whether you are borrowing responsibly. You should never take out a payday loan for long term expenses, or financial difficulty like losing your job. Payday loans are meant for unexpected and unforeseen financial situations and should not be used as a long term financial solution. In that sort of situation, you could end up paying a lot more than you intend, as you can't guarantee that you'd be able to make the repayment on time. Short term loans should also not be used for paying back other credit, as this could mean that you are in a cycle of borrowing, and end up borrowing more and more. If you wish to discuss your debts with a third party, you can contact companies like Step Change for free impartial advice.

What is APR?

APR stands for Annual Percentage Rate - the interest rate you would pay if you took a loan out for a year. Every payday direct lender legally must tell you the representative APR of their loans. This can look like a large percentage with payday loans, because APR is best used to compare loans taken out over a longer period. PiggyBank will tell you the exact amount of interest you would need to repay - it works out to be 0.8% per day of the amount you borrow.

What Is A PiggyBank Payday Loan?

A PiggyBank payday loan can be taken out between 7 and 35 days. You can borrow between £100 and £400. If you need a larger amount, or over a longer period, you can look at our instalment loans.

Our application is simple, and if you're approved, you should have the funds in your account the same day - we aim to pay out all loans within an hour of approval. We'll ask you for some personal information, your bank account details, and your income and expenditure. We'll then go through credit and affordability checks to make sure we're lending responsibly - you can find more information about these on our eligibility page.

How Would You Repay Your Payday Loan?

At PiggyBank, we give you control over your loan - you can choose the amount you are looking to borrow, and the date you want to repay it.

We'll collect your repayment via the Continuous Payment Authority (CPA) rather than Direct Debit, though there are other ways to make your payment - just ask us for our bank details if you'd rather pay by bank transfer.

If you find yourself in a position where something unexpected comes up, and you're unable to make the payment, we're always here to help. We understand that these things are usually out of your control, and we have options for you no matter what. If you find yourself struggling, you can contact us by phone, email or even letter - all the details are on our Contact Us page.

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