Payday loans are the name commonly given to loans which allow short term borrowing. They are also referred to as short term loans or direct lender loans. All of these different names actually equate to the same product; being one of a ‘short term, high cost’ nature. These payday loans are not the same as larger and longer term credit agreements and therefore are classified differently. Whereas a bank loan may be sought in times when a large sum is needed, say for example for the purchase of a new car. In contrast a payday loans resource may be used when a car repair is needed. This is therefore the fundamental difference in that the reason for borrowing payday loans should match the resource they are able to offer; one which is small in nature and short in repayment term. Payday loans should therefore be considered as only able to support certain and specific types of financial needs, unlike perhaps larger borrowing resources available. Whereas a credit card may see an applicant granted access to several thousands of pounds and therefore may be able to support a range of different financial needs, a payday loan will likely only ever grant a loan of up to £500.00. Today we will be looking at the payday loans in much greater detail, to understand how they can be accessed and exactly how it is that they work.
The vast majority of short term loans are available exclusively via the means of an online based application process. This means that in order to apply an applicant must complete a quick and easy online application form. Over the many years in which payday loans have been available the application form and process thereafter has only ever become more streamlined. As such, nowadays an applicant can expect to be able to complete an application in a matter of only 10 minutes. The application form itself has been specifically tailored to give applicants all the information they require; such as loan amounts and clear options of repayment, whilst also gathering specific information needed for lenders to make an informed and sensible lending decision. During the application customers will be able to select from a range of loan amounts and also a range of different repayment terms. The loan amounts available usually increase in £50.00 sums, starting from a £100.00 loan, extending through to a £300.00 offering for first time applicants. Often payday loans lenders will want to establish a repayment history with a customer before offering higher loan sums, which then are likely to increase to anything from £500.00 through to £750.00.
As well as allowing applicants to make flexible and selection based borrowing decisions, the application form will also gather the information required for lenders to make considered lending decisions. Over the decade or so in which payday loans have been available, lenders have had the opportunity to adapt and update their processes for helping them underwrite applications. The end result of this is that nowadays lenders are better informed and better enabled than ever before in making their lending decisions. Typically, a payday loans lender will use a combination of both electronical based checks and manual checks in order to assess the suitability of an application. In the vast majority of cases the electronic checks happen automatically at the point of the application being submitted. This will allow lenders to make a provisional decision concerning the possibility of the loan being approved. Providing these checks are successful, it is likely that the application will then move onto a manual checking stage. At this point a trained Underwriter will assess the application, to ensure the loan is suitable and also as important; affordable. Like anything there can be times when an electronical means cannot ‘pick up’ on all elements of information provided, in the same way that a manual and therefore human driven check can do. This is why most payday loans lenders will not allow an application to be approved unless a skilled Underwriter has been able to review it accordingly.
With all of the above in mind it would still be accurate to say that payday loans are a quick and discreet borrowing resource, with many applicants receiving a decision concerning their application the same day. In cases of successful applications and where the applicant has a Faster Payment enabled bank account, it is completely possible to receive the agreed loan in a timely and quick manner.