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Things To Consider With UK Payday Loans

by Jim ONeil on January 12, 2012

in Payday Loans News

Cheap loans are becoming more commonplace in the UK but are harder to qualify for these days. Anyone whose credit score is even slightly tarnished is likely to be rejected by banks.

With this financing off the table, many people turn to payday loans. This funding is much more expensive but is also fast, easy to qualify for, and very convenient.

Just because a payday loan is the only option does not mean the borrower must be a victim. Knowledgeable consumers avoid the most common mistakes with this type of financing.

Continuing to make minimum payments on a loan is not always enough to repair credit. A credit agency reviews the borrowing capacity in terms of income.

The amount of money remaining after bills are paid and cash is saved in a retirement or savings account is called disposable income.

If the monthly loan payment exceeds 50 percent of disposable income, credit may be negatively affected even if the person is making payments on time.

To avoid this, look for a loan that is no more than 50 percent of disposable income.

A loan that does not require collateral is called unsecured. This financing usually carries a higher interest rate because the lender is taking on more risk.

However, it does not put any borrower assets in immediate jeopardy in a default situation. For this reason, an unsecured loan is recommended over one that is secured. Though a loan default may never occur, this cautious approach is recommended.

A variable or revolving rate loan is less attractive than a fixed interest rate, fixed term loan. The loans APR may be low when the individual takes variable rate financing but it can increase at any time.

It may rise to the point where installment payments become unavoidable. Payday loans usually have a higher interest rate but this is usually fixed, allowing borrowers to budget their payments.

Selecting a loan with a longer term may seem like a good idea because it decreases the monthly payment amount. However, some borrowers do this without thinking about the near future.

If they will be retiring or are slated to lose their job, a long-term loan may not be the best solution. Shorter-term financing like payday loans may be more suitable. These are repaid within a few weeks or by the next paycheck.

Payday lenders look for several things when reviewing loan applications, including a stable job that offers steady income. This provides assurance that the borrower can afford to repay the loan plus interest and fees.

Individuals who are unable to prove their income is stable and expected to continue will most likely be denied for a no credit check payday loan.

Whether people have good or bad credit, they may qualify for payday loans as long as they have a steady paying job. By comparing loans APR, they can lower their overall expense, assuming they repay the loan on time.

Loan funds arrive quickly and the money can be used for any purpose. Responsible use of payday loans may even improve the credit score.

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