In simple terms, a payday loan is a special kind of short-term loan that allows a borrower to get a cash advance. This loan attracts high-interest rates and usually lasts for a short period. This loan covers the borrower’s needs until their next paycheque. Since the borrower has to pay back the cash advance from their next paycheque, the payday loan is often only a portion of their paycheque.
It is worthwhile to note that a payday loan is created to help you get enough money till your next paycheque. Resultantly, the amounts are usually small. In most cases, you cannot get a payday loan that is above £1500 but some lenders may be able to lend you more than this amount. However, since their interest rates are usually high, payday loans are known as expensive loans.
Nevertheless, you should note that some lenders allow you to get loans for extended periods (usually three months). For such longer loans, you will have to repay in instalments but they tend to charge higher interests. A few lenders will even enable you to decide the repayment period of your longer payday loan.
Although a payday loan could worsen your financial situation, it can come in handy when you have emergencies such as urgent plumbing issues, private medical needs, accommodation costs, unexpected car problems, etc. Notably, payday loans are also referred to as cheque advance loans or cash advance loans.
Basic requirements for a payday loan
Just like other kinds of loans, a payday loan has some specific requirements. Therefore, before you can obtain this cash advance loan, you need to meet these eligibility criteria.
The basic requirements to qualify for a payday loan are:
The first eligibility criterion for a payday loan is that you must be at least 18 years old. Therefore, if you are not up to this age, you cannot access a payday loan from any licensed lender.
- UK citizenship
If you are interested in obtaining a payday loan in the UK, you must be a UK citizen.
- A bank account
To qualify for a payday loan, you must have an active bank account. You will receive the loan directly in this bank account from the lender. However, some doorstep lenders may still allow you to get a loan from them even without an active bank account.
In many cases, your active bank account may be used by the lender to evaluate your affordability. This means that the lender wants to confirm whether you can afford to pay back the payday loan you have requested. The lender will focus on your expenditure and income to ascertain your affordability. In some situations, you may be required to complete a form to show the cash flow in your bank account.
Apart from the aforementioned basic requirements for a payday loan, many lenders will also ask you for a few other things before you can obtain a payday loan from them. Some of the things you may still need to qualify for a payday loan include:
- Good credit history
Some lenders will not allow you to obtain a loan from them until they have completed a credit check. The essence of this check is to ascertain whether you usually pay back loans on time or not. Equifax, TransUnion, and Experian are a few of the companies that facilitate credit checks for lenders.
If you don’t have a history of paying back your loan before or when due, you may be denied a payday loan by some lenders.
Many lenders only provide payday loans to people that are employed. Therefore, if you don’t have a job when applying for a loan from such companies, you will be denied a chance to get the loan.
Another requirement that you can expect lots of lenders to ask is a guarantor. That is, you need to provide a guarantor to the lender. This guarantor must be someone that can vouch for you that you can repay the loan. However, if you don’t repay the loan at the right time, the guarantor is expected to repay your loan.
Nonetheless, a guarantor is usually required for borrowers that have little or no credit history. Hence, the lender does not trust their ability to repay the loan.
Now that you have understood the meaning of a payday loan and its basic requirements, you can decide whether you need it or not. Besides, if you have applied for a payday loan and failed to get it, you can take a look at the basic requirements above to ascertain your eligibility.
Would you like to obtain a payday loan today in the UK? Don’t hesitate to get in touch with Cobra Payday Loans for a quick and hassle-free payday loan of as much as £5000.
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