Most of us have seen advertisements for Payday Loans or you may even know someone who took advantage of the service. The Payday Loan industry serves those who have an urgent and immediate need for cash that they can’t get any other way. When they receive their next paycheck they repay the loan, hence the name “Payday Loans”.

Payday loans are a way to tide one over between paychecks if an emergency arises. They are typically between £50 and £1,000 depending on your need. Any UK resident over the age of 18 that can prove they are employed can get a Payday loan, usually on the same day that they apply for it.

Payday loans are available online, making the process even more quick and convenient. You simply fill out a form listing your name, address and employment details. Most Payday loan companies don’t perform credit checks; as long as you are employed and appear capable of paying back the loan they don’t care about your credit rating. You do have to have a bank account in which they can deposit the funds if your request is approved. You will usually see the money show up in your account within hours.

Another feature people like about Payday loans is that they are unsecured. In other words, you don’t have to put up any collateral such as real estate, your car or other valuables to guarantee the loan.

Payday loans sound like a good idea but there are many disadvantages to this type of transaction. Interest rates are 25%; if you borrow £100 you will have to pay back £125. When the loan comes due at your next payday you must pay back the full amount plus the interest. A few Payday loan companies will consent to longer arrangements but such an accommodation is not typical and you’ll pay a much higher rate of interest.

Payday loans, when used sensibly, can help you out in a real emergency. Car repairs, a broken water heater in your home or an unexpected need to travel can happen at any time. If you are not prepared with money you’ve saved, Payday loans can help in such times of need.

The problem some people have with Payday loans is that when the loan comes due and they pay it back, they find that they don’t have enough money to live on until the next paycheck. They may not be able to pay the rent/mortgage, buy groceries or pay their utilities. This is when they apply for another loan and enter a vicious cycle of perpetual debt.

Payday loans should be used only after you have exhausted all other alternatives. This type loan service fills a real need but should be used only as a last resort.