Is It A ‘Pay Day’ Loan or A ‘Payday’ Loan?
This is for those of you that like to know the ins and outs of the English language. You might be curious why some companies call their short term products payday loans. Others go for the three word approach – pay day loan. But which do you think is correct?
Let’s go back to the start
Before we start quibbling over the finer details, let’s go through a few of the basics. However you choose to spell it, this term has become widely used in the past decade or so. More so as the short term lending sector has exploded across the UK and around the world.
The rise of this particular branch of the short term lending sector is an interesting story in itself. The economic crisis of 2008 meant banks, which were responsible for the crisis, started to struggle. Over the years they had put profits ahead of stability and made way too many risky lending decisions. So, as the crisis took hold, they started to reduce their risk and reign in their lending.
The average Sheila on the street, that’s you and I, used to go to the banks if we needed a loan. But, as banks started to lend less and less, it became difficult to source the credit we needed. As the banks essentially shut up shop, we had nowhere to turn to. This left a huge gap in the market that short term lenders started to fill.
What is a pay day loan?
The term describes a short-term loan, generally for £500 or less, which is typically repayable within a month. The loans are often structured to be repaid with one lump sum payment. Although in some cases they can be artfully structured to be repaid in instalments over a longer term.
Pay day loans are specifically designed to tide people over in emergencies. It is for people who don’t have anywhere else to go can borrow money to pay unexpected or essential expenses. When used in this way, this type of short term loan has provided a valuable lifeline for millions of borrowers around the UK. Estimates suggest that there were as many as 2 million payday customers in the UK last year.
Why is it called a pay day loan?
This type of loan is for taking out over a short period of time. Typically used to fund unexpected expenses that arise just a couple of days before the end of the month. For example, if your car breaks down and you don’t have the money to fix it, this product will help you bridge the financial gap and get you back on the road. Importantly, you do not have to wait until ‘payday’ to pay for the repairs.
So which term is correct?
It seems like we might have good reason to be a bit confused. Oxford Dictionaries have the term payday as a single word to mean ‘the day on which someone receives their wages’. The MacMillan Dictionary has it listed as: pay day – ‘the day when you get your pay’.
So, if the combined minds of the Oxford and MacMillan Dictionaries can’t decide on the correct term, what hope do we have? Realistically, probably none. Perhaps we’ll just stick with the term pay day loan for now until we’re proved wrong.