How to choose a good payday loan company

How to choose a good payday loan company
Lauren Howells
How to choose a good payday loan company

If you are looking to take out a loan until payday, you will need to start considering how to choose a good payday loan company that you are happy to work with.

If you have already started looking, you have probably already discovered that finding the best payday loans for your circumstances and your needs is not always a straightforward task.

There are hundreds of reputable and trustworthy bad credit loan providers in the UK.

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The problem for borrowers is that each of these direct lenders has their own “customer profile” – a “customer profile” is the type of person that individual loan companies would like to lend money to.

Loan companies never publish their profiles on their websites so choosing a direct lender to make an application to is going to be difficult at the best of times.

After all, how do you know that you are applying to the right one if they will not tell you who they like to lend to?

In this article, we look at the ways you can check whether a lender is a good quick loan company and how to carry out your research before you borrow any more.

Why it is important to identify a good loan company

The answer is that not all loan companies are equal and some of them are not regulated. You need to do everything possible to safeguard yourself from coming into contact with these firms.

All reputable and trustworthy lenders in the UK are regulated by the Financial Conduct Authority. You can find a list of every direct loan lender and small loan broker on the Financial Services Register (more on that below).

There are sharks out there however so it always pays to be cautious.

Why it is important to identify a good loan company is that there are scammers out there who use reputable company names specifically to lure potential borrowers in.

Scammers will even go to the extreme lengths of creating websites that look like genuine companies’ websites.

The people who are unfortunately fooled and who then put in their personal and financial details may end up sharing valuable information with criminals who then sell their details on the dark web.

It is not just payday loan companies this happens to.

Gov.uk recently published advice for people at risk of being scammed by websites, emails, and phone calls from criminals pretending to be part of the government.

How to choose a good loan company

You must consider what is important to you when taking out a payday loan. Of course, the company you choose to borrow from matters a lot as well as whether a same day loan is actually the right product for your circumstances.

Search for your lender on the Financial Services Register

You should always search for your lender on the Financial Services Register.

All online loan lenders are regulated by the Financial Conduct Authority and each bad credit loan lender with a license appears on the Financial Services Register.

This should be the very first place that you go to check to see if a direct lender or a broker is legitimate and that they have passed the stringent tests that quick loan lenders and brokers must pass in order to be able to do business.

Take a look at the Quick Quid search page on the Financial Services Register.

Quick Quid is a respected, long-established small loan company – they were one of the first in the market. When this article was written, the Financial Services Register found two unauthorised firms (here and here) trading with their name.

Quick Quid, whose parent company is called CashEuroNet, can be seen here on the register. On their page and on every page listing an authorised licensed company, you can see for yourself the various tests that they’ve passed to join the register.

You can even see the names of the individuals behind each firm and the registered websites that they trade from.

Make sure that you do search for your lender on the Financial Services Register because it is easy to see how many victims are caught out by clever scams.

Pay attention to media reports

Over the last ten years, and particularly before the big reforms to instant loans came in during 2016, anyone who had time to pay attention to media reports about the high-cost credit sector would have read a lot of unfavourable information about the companies and the experiences that borrowers had.

It is always a good idea to pay attention to media reports whenever you are thinking about buying something for your home or taking out a loan.

If you read something bad about a company, you are right to think twice.

For the payday loan companies who survived and kept their Financial Conduct Authority licenses after 2016, it might not be such a good idea to pay attention to media reports from years ago

That is because the companies which still have a licence operate under a strict code of conduct covering everything from the interest rates they charge to how they treat customers who have fallen behind on repayments.

Wonga, Peachy, and Quick Quid all received bad press coverage in the past. Wonga and Peachy held their hands up and admitted that they had not behaved in a way that benefited their customers and, in partnership with the Financial Conduct Authority, paid compensation to their customers and really tightened up their lending criteria.

Now all Financial Conduct Authority-licensed same day loan lender and brokers operate under the same regulations which means much better protection for borrower.

Use customer reviews

Payday loan reviews are an excellent source of information when researching loan providers.

It is wise to use customer reviews before finally deciding on the payday loan company you want to use. The internet is full of review sites and Trustpilot has their very own review section for non-bank finance companies.

Sites like Trustpilot and others are available at any time for you if you want to use customer reviews as part of how you make your decision on which online loan lender or bad credit loan broker you chose.

Would-be borrowers who use customer reviews can get a really good insight into how a company treats its customers from the point of applying for a loan right through to their customer service departments and how good they are.

Most people understandably want to choose a company which they think treats customers in the right way because there is nothing worse than feeling that a lender takes you and your business for granted.

Learn how to identify a loan scam

You should always learn how to identify a loan scam to protect yourself.

In fact, whenever you are online, you should learn how to identify scams in general because, as time goes on, the methods that criminals use get more and more sophisticated.

CashLady’s team is so keen for our customers and website visitors to learn how to identify a loan scam that we’ve written about it extensively before.

What are the major warning signs?

  • Brokers charging a fee to arrange a payday loan for you where they do not guarantee success.
  • Companies offering to lend you money with no credit check but for which you need to pay an application fee
  • A company is unwilling to show you their Financial Conduct Authority licence
  • You are approached at your home by someone you do not know or trust to take out a loan.

If you need to take out a quick loan because there is a financial emergency you do not have the cash for right now, make sure that you learn how to identify a scam because the people who fall for them end up paying far more back than they need to with unauthorised lenders use scare tactics to get people to pay up.

How to decide which is the best payday loan

What information do you need to know on how to decide which is the best payday loan for you? A search of the internet is always a good start – particularly the customer review sites we mentioned earlier in this article.

More important than knowing how to decide which is the best payday loan is first knowing whether a small loan is actually the best option for you.

Think about how much you need to borrow

Repeated borrowing is a sign of financial difficulty, and perhaps a debt spiral.

Payday loans only used to mean taking out a loan until the next time you received your wages.

Now, there are short-term loans meaning that there is much more choice available to you than there was before.

That is why you should really think about how much you need to borrow before you approach a lender or a broker.

When you think about how much you need to borrow, you also need to consider the monthly repayments you will be making to your lender.

Also, please make sure you do not borrow any more than you actually need.

If you need less than £500, a standard bad credit loan might be best.

Between £500 and £2,000, you can take out an instalment loan spreading the payments over up to 12 months. If you need more than £2,000 and you want even more flexibility over how long you have to pay it back, a guarantor loan might be suitable.

Daily interest versus representative APR

Daily interest versus representative APR – this confuses a lot of people because, behind them, there are some pretty complex calculations.

The Annual Percentage Rate (APR) is a way of describing something called a compound interest rate and the reason this is important is that it tells you the interest charged for borrowing money over one year.

The Representative APR includes everything – interest rates, annual fees, and other charges that contribute towards the repayment of a loan.

Under UK law, a loan provider must display their representative APR on all their advertising, including their website.

Therefore, some people will pay the representative APR rate, some will pay more, and some will pay less. Until you get an offer from a loan company, you never know what rate you will be actually offered and whether it is better, worse, or the same as the rate they advertise.

Confused? So are many people. It gets even more confusing when, sometimes, a lender has a lower representative APR but uses the maximum daily interest rate. It can also go the opposite way – lenders with larger representative APRs can have the lowest daily rate of interest.

How long you would like to repay your loan

When thinking about how long you would like to repay your loan, you should consider the monthly repayments you will need to make back to the lender.

Let us say that you want to borrow £300. Part of your decision-making process on how long you would like to repay the loan is whether that should be a payday loan or a short-term loan.

The larger the amount you borrow, the bigger your one repayment with a payday loan. Whatever you do, make sure you do not commit to pay a sum of money back that will put you in financial difficulty doing so.

With a £1,000 loan, it might be better to go for a short-term facility lasting a few months to give yourself some breathing room.

Please be aware that some instalment loan providers will ask you to pay a higher amount on your first repayment with subsequent repayments falling in size.

It’s always best to check the exact repayment schedule that your instant loan provider specifies.

If you want to borrow a lot more and you do not believe that your credit record would mean that you could get a loan from a bank or a building society, a guarantor loan is an alternative worth considering.

Consider the reason for applying for short-term credit

Borrowing money should never be frivolous or trivial.

Debt makes life more difficult and debt means you have less money to spend every month because you are making monthly repayments to lenders and credit card companies.

You should always very carefully consider the reason for applying for short-term credit.

Payday loans are designed to cover emergency situations like medical bills, funeral expenses, or if your car breaks down.

These are bills that you do not have to pay every month – they are always a surprise and sometimes the bill can be that high that it eats up all of your spare cash every month.

If you find yourself making use of payday loans too often, then There is a real danger that you may end up in what finance experts call a “debt spiral”.

A debt spiral is when you find that you are taking out one new loan to make the repayments on another time after time. If this sounds like the situation you are in, you may want to consider an Individual Voluntary Arrangement, a Debt Relief Order (not in Scotland), or bankruptcy.

You should always try to decrease your expenditure or increase the amount of income you bring into your household, even if you are not looking for credit at the time.

By saving a small amount of money every month, you might be able to pay for the types of emergency situations instant loans are there to cover from your own nest egg.

When you consider the reason for applying for short-term credit in your individual circumstances, some borrowers decide that a revolving credit facility might work better for them.

A revolving credit facility is like a cross between a bank overdraft and a credit card.

How much support do you have from other people?

How much support do you have from other people, like friends or family members?

Guarantors provide lenders with extra security to get their money back.

If you have someone who would be willing to help you get a loan by promising to make the repayments for you if you weren’t able to, a guarantor loan is a consideration worth taking seriously.

Your friend or family member will need to have a good credit rating for you to make a successful application.

Be careful though because if you cannot pay and your guarantor cannot, for whatever reason, pay either, you will both receive country court judgements as a result.

This could put a huge strain on your relationship with your guarantor so please ask yourself if you are willing to risk the relationship even before you ask the person who you have in mind.

Find good payday lenders through a broker

You can save time and money if you choose to find good payday lenders through a broker or a comparison site.

There are hundreds of short-term credit companies in the UK so choosing which one is right for you could mean a very long search if you are doing it yourself.

Brokers like CashLady are licensed and registered with the Financial Conduct Authority and so are the lenders on our panel.

Brokers are subject to all the same checks and tests that lenders must pass to get their permission to trade.

How do you find good payday lenders through a broker? Make an application through one and let them do the work of matching you with the right lender.

At CashLady, all of our lenders are authorised by the Financial Conduct Authority and this gives you the peace of mind you need that they will act fairly and treat their customers well.

Summary

When you apply for a payday loan through CashLady.com, it does not mean that you have to accept any offer we find for you.

If you are successful, you will first receive offers of approval in principle but you are then free to make all your own checks on the lender which has indicated that they are happy and comfortable lending you money.

You can take your time to check online reviews about their products and services. You can even check the Financial Services Register website if you want to see their licence.

 

With CashLady, our services are always free and you are never under any obligation to accept an offer one of our panel of lenders makes you.

If you want to know “what is the difference between a broker and a lender?”, please click here. Our article may help you decide who you want to make an application with.

 

Lauren Howells

After attaining her Law degree in one of London’s esteemed universities, Lauren took on a role writing about finance and legal issues in various business to business publications. Deciding that writing was where her passion lay, she now works as a full-time freelance content writer for a wide range of businesses, including CashLady. “What I really enjoy about writing for CashLady is the opportunity to write about real issues that actually help people in their day-to-day lives.” In her free time, Lauren loves to read (and write!) novels, research anything and everything and continue to learn French, for those trips to her favourite country across the Channel.

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