Payday Loan

A payday loan (also called a paycheck advance) is a small, short-term loan that is intended to cover a borrower's expenses until his or her next payday. A payday loan is a unique loan in the UK in the sense that the borrower gets cash within 24 to 48 hours.

No other loan offers cash as fast as payday loans. This makes this loan well equipped to deal with an emergency situation. Payday loans are an American phenomenon that have been growing fast in the UK market over the last five years. The premise is that they offer a relatively small amount of cash (usually up to £500) for a short term, around 2 weeks (or until ‘payday’). The providers charge a fee for the loan usually expressed as a flat fee per £100 borrowed – usually around £25.

The basic loan process is simply that a lender provides a short-term unsecured loan to be repaid at the borrower's next pay day. Typically, some verification of employment or income is involved (via pay stubs and bank statements), but some lenders may omit this. Individual companies and franchises have their own underwriting criteria.The average loan size is around £300, and two-thirds of borrowers have annual incomes below £25,000.

There are no restrictions on the interest rates payday loan companies can charge, although they are required by law to state the effective annual percentage rate (APR)