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Payday Loans

Payday Loans

You have been searching for Payday Loans, this article provides information on Payday Loans.

Payday loans have a very mixed reputation. On the one hand they can be a huge relief for those struggling to make it through the month financially. On the other hand, if used incorrectly they can lead to a significant amount of debt. There are a number of important factors you need to consider before you apply for this type of loan. Here you’ll find out everything you need to know about how to do payday loans properly. 

How to use Payday Loans

Everyone starts out with good intentions when they apply for a payday loan. Many people take out just enough to see them through and they pay it back on the chosen date without any problems. While this should be the end of the payday loan cycle, it often symbolises the beginning. Once you know you can take out cash when you need it, it’s easy to fall into a pattern of borrowing money each month. 

Payday Loans

It starts to become a problem when you take out a payday loan without really needing one. For example, lending the money to go on day trips or to buy yourself something nice as a treat. This is a slippery slope that can soon see you heading into debt territory. 

Payday loans are designed for emergencies only. Home repairs, car breakdown, unexpected bills and emergency trips to the vet are all good examples of payday loan uses. You should only ever borrow a payday loan as a one off, not as a regular occurrence. 

Never extend a payday loan 

If there’s one tip you should always follow when looking at how to do payday loans, it’s to pay the loan back in full, on time. Most lenders give you the option to extend the loan at the end of the month. Even if you can afford to pay it back, it can be tempting to extend the repayments so you have more available money to treat yourself now. The problem with this is the high interest rates you will be faced with.

When you apply for a standard personal loan, the interest rates are usually a maximum of 21%. However, depending upon your credit rating you can typically get one for 5%-15%. When you compare that to payday loan rates which range from 2000% to 5000%, you’ll soon realise the potential problem. 

The extortionate rates will only kick in if you don’t pay the loan back within the month. If all goes well and you follow the loan agreement, you’ll usually only pay £20 interest on every £100 borrowed. However, if you choose to extend the loan you’ll start facing the higher interest charges. This is where many people have managed to get themselves into serious debt. A loan of just one hundred pounds can soon turn into thousands of pounds. That’s why you really need to focus on paying it back on your payday. 

How much to borrow with Payday Loans

Following on from the last tip on how to do payday loans properly, you should never borrow more money than you need. This is the sure-fire way to get yourself further into debt. If you borrow a high amount, you will likely be left with very little money at the end of the month. This would mean you’d have to apply for another payday loan and the cycle would continue. Payday loans are supposed to be one off, emergency cash loans. They should never be used long term. 

Most payday lenders will ask how much you earn each month to establish what you can afford to pay back. You will also sometimes need to provide proof of earnings. They won’t lend you the money if you would likely end up in further financial trouble after you pay the loan back. Of course not all lenders are that responsible. Some won’t care whether you are borrowing too much or not. Therefore you need to ensure for your own sake that you borrow as little as possible.

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APR Explained

Rates between 45.3% ARR to maximum 1575% APR

Representative 277.6% APR

Representative Example:

Amount of credit: £850 for 11 months at £146.30 per month.

Total repayment of £1,609.25. Interest: £759.25.

Interest rate: 150% pa (fixed). 277.6% APR Representative.

APR rates range from 45.3% APR to 1575% Max APR. Your APR rate will be based on your circumstances.

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