There are many companies that offer payday loans. Most of them operate exclusively online. Although all payday lenders offer the same product, the conditions for qualification differ. Beyond their conditions, the terms also differ with each offering different interest rate and minimum initial loan.
As a borrower, you must do an initial search to understand the terms and conditions of a few of the payday lenders before you make your decision on which company to borrow from. This will ensure you maximize the benefits.
What is a payday loan?
When borrowers want a loan in the easiest way possible, they look for a lender with relaxed conditions. They also look for a lender that responds quickly because their need is money and not long processes.
That is what a payday loan is and that is what they provide. They have quick processing time and few conditions. The loans also have a short payment period and borrowers can borrow any amount from 50 pounds.
To qualify for a payday loan, you don’t need to have an account with the lender. When applying for the loan, there are three important factors to consider.
How much do I need?
The first thing to consider before applying for online payday loans is the amount of money you need. This is a wide question and it will be guided by several factors. First, the need for a loan has its source. It could be that you plan to start a business and you don’t have enough money or you have to pay rent.
You now have noted the source of the need. The next thing will be to ask yourself how soon you need the money. It could be you need the money in the next half an hour, a day or a week. Once you have identified your timeframe, calculate and establish how much money you need.
A few points will guide you when doing your calculations among which will be the purpose of the money. If you want money to help you commute to your workplace for the next two weeks, calculate how much you pay per day and the total for the next two weeks.
If your commuter fare is 10 pounds per day and you work Monday to Friday, you have ten days to commute. That means you need 100 pounds for the two weeks. You can add about 20% of the total for any miscellaneous expenditure. In total, you will request a £120 loan.
Will I be able to pay?
Now that you know how much money you need, ask yourself the next important question. If I get the loan, will I be able to pay? Payday loans mostly will not exceed 30 days unless under special circumstances.
Several factors will help you make this decision. First, check how much your earnings are. If you are employed, consider how much you earn per month. Next, check all the deductions made by your employer including loans, health insurance, retirement benefits and so on.
Check your house and consider your monthly budget including groceries, commuting or gas, utility bills, makeups and so on. Deduct the amount you pay yourself each month, then check the balance.
Now answer the question of whether you will be able to pay the loan from your salary. If your answer is no, think of where else you can get money to help you pay the loan. This question will help strategize on how you will pay the money if your source fails. If your answer is yes, ensure you consider the loan in your next paycheck.
Do I qualify
You are now confident that you can service your loan. It is time to answer your final question –
do I qualify? Whether you qualify or not will be determined by a few points. First, shop online for at least five payday lenders.
Review the lenders in terms of their minimum initial loan, interest rate, payment period, documents required and processing time. Some lenders will tell you their minimum borrowing is 500 pounds. Since you only need 120 pounds, it means you will not qualify to take a loan with that lender.
Next, check the lender’s interest rate. If the interest rate of lender B is higher than lender K, you disqualify yourself from lender B. Due to competition, some lenders have raised their payment period to three months.
A higher payment period is advantageous to you because you will pay three instalments. That means it will be less challenging for you. Finally, check the paperwork you will be required to submit. Lenders with lesser paperwork could be a better choice. After considering all the above three factors successfully, you will almost be certain that your loan will be approved. Go ahead now and apply for the loan.
This post is contributed by Allan Smith from Day to Day Finance. Smith is a professional finance writer specializing in personal finance. He has worked in the finance sector for a long time.
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