Comparing payday loans

Comparing payday loans
August 10, 2016 Lauren Howells
Comparing payday loans

In the UK, the payday loan industry features well-known lenders. Such as Wonga and QuickQuid, along with many smaller and lesser-known companies.

No two lenders are the same, though many can seem similar.

Comparing payday loans can be time-consuming and complicated.

Which lender is offering the best deal?

Which is most likely to accept your loan application?

What makes one lender different to another?

Before applying for a payday loan, make sure you conduct extensive research and make an educated decision.

Here are a few tips for comparing payday loans:

Use payday loan UK comparison websites

Credit rating protection

You could compare loans by visiting each lender’s own website. And recording all the important details. As well as asking for quotes and storing your results in a computer-based spreadsheet.

Yet, this would not just be time consuming, it would also affect your credit rating.

It is important to make as few applications as possible. With payday loan comparison websites, applications for quotes get made all in one go.

Your credit score is likely to fare better as a result.

Comparison websites – information in one place

When you use a comparison site, you can see all the important information in one place.

You can compare the differences between many lenders. Whether they are offering different APRs or different charges for late payments.

With Cash Lady, the hard work of comparing loans gets done on your behalf. You will get offered a loan from a provider that will meet your individual requirements. Meaning you do not need to undertake all the leg work.

Lenders need to provide clear information about their loans. Along with any charges and fees, but it can still take time to uncover all the relevant information.

By using a loan comparison website, you can skip the research stage.

Comparing payday loans: what to look out for

If you do not know what to look for, your attempts to compare short term loans could leave you even more confused.

There are many different factors to consider, before choosing which loan to apply for.

FCA regulations, though  important for the protection of consumers. Can sometimes make things even more complicated.

The Financial Conduct Authority sets specific limits on interest rates and default fees. Which many of today’s lenders follow closely.

When almost every lender charges 80p of interest per £100 borrowed, per day, how do you find the difference between one and another?

Here are some important things to look out for when you are comparing payday loans:

The APR

The APR, or Annual Percentage Rate, is the cost of a loan that has scaled up over a full year.

Payday loans are high-interest financial products, intended for use over a short time.

At first glance, APR percentages can seem high. But in reality, a payday loan should never get considered for a full year of borrowing.

The actual costs of borrowing are far more informative. Typically £124 repaid for £100 borrowed, over the course of a month.

The APR on a loan is a useful figure when you are comparing like for like. But you should not compare a payday loan with a traditional loan from the bank.

But when comparing two payday loans offers, you can use the APR figure to see which will cost less.

Lending criteria

Lenders will not provide payday loans to customers under the age of 18. You will also need to be a UK resident. In the majority of cases, you get expected to have an active bank account with debit card.

Aside from these essentials, each lender will put in place their own lending criteria. They may need a specific income or that you must be in full-time employment.

Some will not lend money if you are self-employed. Whilst others only provide funds to people that do not have outstanding loans elsewhere.

Before making a formal loan application do this. Go through the checklist. And make sure that you will pass the lender’s eligibility assessment.

Fees and charges

Some lenders choose not to charge late fees. Others charge a £15 default fee. Which is the most allowed by the Financial Conduct Authority.

If you do not expect to be able to meet the repayment deadlines, you should not apply for a payday loan. If the worst happens and you struggle to repay your debt, it is important you understand the costs of late repayment.

Before sending your application, it is also worth checking the more detailed late payment policy. Will you get charged immediately, or offered a few extra days to make your payment?

Repayment options

Most lenders collect repayments using a Continuous Payment Authority. This allows them to take each instalment from your bank account. Without applying for separate authorisation.

The lender can take a different amount of money each month if that is what gets agreed.

There are benefits to using a Continuous Payment Authority.

A CPA removes the risk of forgetting to pay off your debt. Yet, if you are not happy with this option you may find another lender. One that offers a more suitable alternative such as online payments through the website.

Early repayment

If you are borrowing money, it can be reassuring to know you can clear your debt early. Especially if you have the funds available.

Some lenders do not allow early repayment. But most will accommodate early repayment without penalty.

If a lender charges an early repayment fee it may still be cheaper than waiting for the duration of the loan term. Or, the charges it may erase the benefits of making the early payment.

Always check with the figures and terms of your agreement before deciding.

Other lenders will offer the option to repay your debt early with no extra charges. You may even be able to save money by repaying early, reducing the amount of interest that igets added.

Loan terms

True payday loans get designed to bridge the gap between one payday and the next. Meaning that they get provided for just one month. Or possibly for an even shorter period.

Other short-term loans, included under the ‘payday loan’ umbrella, are instalment loans. To get paid back over a longer loan term, typically between 2 and 6 months.

When comparing payday loans, think about how long you are likely to need the money for. Try to clear your debt as quickly as possible, but do not put yourself under pressure. Be reasonable about how much you can afford to pay back each month.

Instalment amounts

If you are applying for an instalment loan, it is important to know your repayment dates. And the amount that you will owe each time.

Some lenders will split your loan equally across all instalments. Meaning you will pay the same amount each time.

Other lenders might have an inflated first or last instalment. Charging more at the start or end of your loan period than they do on other instalment dates.

Individual instalment amounts are definitely something to look out for.

You may feel comfortable paying back £50 each month. But what if you have to pay £100 for your first instalment, and £40 per month thereafter? The inflated first instalment could catch you out. So make sure that you understand your repayment schedule before taking on any new debt.

Affordability assessments

It is important to know how a lender assesses affordability.

All lenders need to carry out stringent affordability assessments. And to be responsible about who they lend to. But how these assessments getcarried out will vary from lender to lender.

Some lenders base their decision on your credit score with a limit. It determines whether your application gets accepted or rejected.

Other lenders take a more personalised approach. Factoring in a wide range of details such as your loan purpose and detailed income. And your circumstances at the time of borrowing.

As technologies improve, lenders can even request read-only access to your online banking. This access allows them to view statements and transactions. But is secure to prevent lenders from making any transactions of their own.

These lenders will base their decision on the state of your bank account. How much you have coming in, how much money is going out and even where it is spent.

It is useful to know how lenders will be judging your suitability for any of their financial products. When comparing lenders, look into their assessment criteria.

Comparing payday loans: a lot to think about

You would get forgiven for thinking that payday loans are all the same. Or that the only difference is the amount that you will pay back. In fact, lenders vary more under the surface than the average consumer might expect.

Before applying for a loan, compare lenders and their offerings. To see which provider will best suit your needs.

It is important to make an informed decision.

Payday loan comparison websites can bring all the important details together. Saving you from hours spent searching through each lender’s site.