With so many payday lenders online, it can be hard to pick the most reliable ones. The added stress of financial struggles makes things even harder. You need to know how to compare your options.
There are several things that separate the best from the worst. If you’re looking for a short-term loan, choosing well makes the difference between relief and extra headaches.
We can help there. Here is your guide to comparing payday loan offers.
Annual Percentage Rate
APR should be one of the first things you spot in a short-term loan. It shows the percentage of interest you would pay over a 12-month period for the amount borrowed. Standard charges should be included in APR but check with your direct lender to make sure.
At first glance, payday loans have staggering APRs. However, as we said, APR is worked out for a full year. Short-term loans, by definition, are for much shorter terms – 3 to 9 months in most cases.
APR is representative which means at least 51% should get that rate. The remainder may get a higher rate, but your direct lender should make this clear to you.
Weigh up the APR for the best lenders before you decide. Add in any extra charges and consider their reputation. It may be worth paying a little more for peace of mind.
Customer service and reputation
Check as many online reviews as you can. Ask your peers, if you feel comfortable, for recommendations. The short-term loan business is competitive, and sub-par lenders fail to last. That said, look for reviews that talk about service, added costs and processing times.
Make sure a direct lender is authorized by the Financial Conduct Authority (FCA). If they are, they should have an authorization number on their website. If not, check the FCA’s services registry for their details.
Repayment terms and Extra Fees
Responsible lenders should never charge you for early repayment. To do so suggests they want to profit from your financial hardship. This is unethical and opportunistic; check you can repay whenever you have the funds.
Ask about late payment fees too. Some lenders charge huge amounts, while others are more forgiving. The FCA placed caps on payday loan charges in 2015.
How will you pay back your loan? Some lenders offer direct debit. Others insist on a continuing payment authority (CPA). This is a recurring payment linked to one of your cards, and it may make you feel less in control of your repayments.
Processing Times
When you’re short of cash with bills to pay, time is short. Ask your lender about their approval and funding times. Short-term direct lenders can approve and fund a loan the same day. The best even offer this with a guarantee.
Processing times are one the reasons to choose a direct lender over a brokerage. Many people have used brokers to arrange a payday loan, but this adds a third-party to the situation. Complications arise because you must go through your broker for everything, adding time and stress.
Data protection is a factor too. A GDPR-compliant direct lender will keep your details safe. Some brokerages sell data on to marketing firms and other companies.
Choose the Best Offer for Your Needs
We hope this guide helps you choose the payday loan for you. There are countless reliable direct lenders in the UK, and this information should help you find them.
Remember to exhaust your other options before taking a payday loan. But if you choose well, payday loans are one of the fastest ways to resolve your income shortfall.