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Know More about Payday Loans Basics

# How do payday advances function?

You can for the most part get amongst £100 and £300 with a payday advance, albeit a few loan specialists permit you to acquire as much as £1,000.

As indicated by investigation by the Competition Commission, the normal payday credit is £260, however a fourth of advances are for £100 or less.

Advances ordinarily keep going for 31 days, and yearly rate rates (APRs) charged can be as high as 5,000%. Subsequently, a payday credit can cost as much as £25 for each £100 acquired. Banks contend that rates are set at this level as payday advances are typically reimbursed inside a brief timeframe.

# How do you repay a payday loan?

When you apply for a payday loan, you will often be asked for your debit or credit card details, so that the lender can set up something called a ‘continuous payment authority’.

This basically means the lender can take money from your card at any time, and they can also change the size of the payment without warning.  However, the city regulator the Financial Conduct Authority (FCA) which began regulating the payday loans industry on April 1 this year, introduced new rules on the same date to restrict the amount of the times a lender can take money from a borrower’s account without their specific permission to two. Lenders must also, wherever possible, only take full repayments.

You can cancel an existing continuous payment authority by contacting the company and asking it to stop. You can also cancel directly with your card issuer, although you should also inform the company too. Remember that even if you cancel the continuous payment authority, you will have to pay off what you owe another way.

# What happens if you don’t pay off your loan by the agreed date?

According to the FCA, over a third of all payday loans are repaid late, or not at all. If you can’t repay what you owe, the amount you’ve borrowed can soar due to the hefty interest rates charged.  Loans are often rolled over, so even though a loan might be advertised as lasting for a month, they can last much longer.  However, again, since April 1, lenders have to limit the number of rollovers to two, so that loans can’t last indefinitely.

# Are there certain rules payday lenders have to abide by?

Yes, there are. As part of the FCA regulations, payday lenders must make sure that their customers can afford the loans they take out. Previously, it was pretty easy for just about anyone to take out a payday loan, but now payday lenders have to conduct proper credit and income checks to ensure that borrowers can repay what they owe.

Lenders must also let their customers know where they can get free debt advice if their loans are being rolled over or refinanced. However, they don’t have to provide this information when a loan is first taken out.

The FCA has also introduced rules that require payday loan adverts to include a ‘wealth warning’. Any advertisement should include the following statement ‘Warning: late payment can call you serious money problems. For help, go to’

Lenders who don’t comply with the new rules risk being shut down, with the FCA estimating that up to one in four firms could be forced of business.

# Are any other further steps being taken to protect consumers?

Yes, the FCA is currently working on introducing an interest rate cap, so that payday lenders can’t charge rates above a certain limit. It plan to start consulting on how this will work in July, and the cap is due to come into effect in January next year.

# What if I have a complaint about a payday loan?

Your first step should be to contact the lender directly. If you aren’t satisfied with their response, or don’t get one in eight weeks, you can take your complaint to the Financial Ombudsman Service, which will investigate on your behalf.

# What are the alternatives to a payday loan?

You may want to consider a credit card instead of a payday loan.  Provided you pay off what you owe within a month – as you would have to with a payday loan – borrowing is interest-free.

Alternatively, if your credit rating is less than perfect, you may want to speak to your local credit union, as they may be able to help you. A credit union is an independent local co-operative organisation whose aim is to help those who might not have access to financial products from banks and building societies.

Check Credit Score, Here Its Tips

Your financial assessment adequately demonstrates how well you’ve overseen credit before. The higher your score, the more probable any credit applications you make will be acknowledged, though the lower your score, the harder you’ll see it to get.

# Approaches to check your credit score

There are three primary credit reference offices, Experian, CallCredit and Equifax, all of which will have a record of your credit score.

You can get a duplicate of your statutory credit petition for £2 from any of these offices. This should be possible internet utilizing the accompanying connections:




You can also apply for a copy of your credit report by post.

Alternatively, there are other services which offer free access to your credit report, such asClearScore and Noddle.

Some banks and credit card providers, such as Barclaycard and Tesco Bank, also provide their customers with free access to their credit report.

Free and statutory reports will provide basic information on your credit score, but credit reference agencies also offer comprehensive ‘credit monitoring’ services for an extra charge, usually in the form of a monthly fee.

These will provide more detail information on your report and will notify you if there is any unusual activity, for example if someone is making numerous applications for credit in your name.

Experian and Equifax both offer 30-day free trials for these services, so if you don’t want to pay the monthly fee, be sure to cancel before the 30 days are up.

# How your credit score is shown

Different credit reference agencies show your score in different ways.

Experian and Equifax express it as a score out of 999, while Callcredit scores you out of five.

Regardless of which numbers are used, the higher the score you get, the better your credit score is.

That means whether you score four out of five or 950 out of 999, you’ve got a very good score, whereas if your score is one or two out for five, or 200 out of 999, your score is bad.

If your score isn’t what you were expecting, make sure there aren’t any irregularities in your credit report. For example, can you spot any information that is incorrect, such as missed payments when you know you paid on time?

If you find something wrong, let the relevant company know so they can amend their records, and put a ‘notice of correction’ on your credit report explaining why the information shown is incorrect.

Bear in mind that your credit score will form only part of any lender’s decision whether or not to lend to you.

They will all base their decisions on different criteria, so just because you are refused by one provider, that doesn’t necessarily mean you will be turned down by them all.

Don’t make multiple credit applications if you are initially refused though as this could damage your credit score further.

Instead, use our Smart Search tool which will give you an indication of how likely you are to be accepted for credit cards or loans without leaving a mark on your credit file.

Credit Card vs Loans

credit-card-vs-loans# Loans

— Pros

Larger borrowing at great rates – You can usually borrow more using a loan than a credit card.

And the good news is if you’re looking to borrow between £7,500 and £15,000, rates are more competitive than ever. In fact, the most competitive rates now hover just above the 3% APR representative mark.

Greater flexibility – Another advantage of a loan is that you can decide how long you need to repay what you owe. If you’re borrowing a large lump sum, you can therefore choose to spread your monthly repayments over a number of years.

You’ll have peace of mind that you know exactly how much you’re repaying each month, and that at the end of the term there will be nothing left to pay.

— Cons

Higher rates for smaller sums – One of the biggest downsides of loans is that rates are often more expensive if you are only borrowing a small amount.

If you take out a loan of around £3,000, for example, you’ll currently be charged more than 7% APR representative.

Fees – If you want to pay off your loan early, there may be a penalty charge to do this, which is usually equivalent to two or three months’ interest.

Some lenders also charge arrangement fees, which can increase the overall cost of credit.

# Credit cards

— Pros

Lengthy 0% deals – One of the big advantages of many credit cards is they offer lengthy 0% introductory rates on purchases.

Provided you pay off what you owe during the introductory period, this means you won’t have to pay interest on your borrowing.

The most competitive credit cards currently offer 0% on purchases for more than two years. Just be sure to clear your debt before the interest-free window ends.

Money transfers – Several credit cards also allow you to make money transfers directly into your current account, which can be useful if you need a cash injection, and rates are often much lower than if you were to take out a personal loan.

In some cases, you won’t have to pay any interest on this borrowing for three years or more. But be aware transfer fees can be high – often around 4% – and you should try to pay off your balance in full before the 0% deal ends and interest kicks in.

Consumer protection – Thanks to Section 75 of the Consumer Credit Act, when you buy something costing between £100 and £30,000 using a credit card, the card provider is jointly liable with the retailer if something goes wrong.

So, for example, if you ordered a chair costing £150 and the shop you bought it from goes bankrupt before it is delivered, the credit card provider should provide you with a full refund.

— Cons

Interest charges – You need to be disciplined about paying off what you owe on a credit card as soon as possible (and definitely before a 0% offer ends), or interest charges can soon mount up. Unlike loans, credit cards don’t require you to clear your balance within a certain timeframe.

Low minimum payments – Minimum monthly payments on cards are often set at very low levels. If you only pay this amount each month, not only will it take you longer to clear your debt, you’ll pay out far more in interest. So try to pay off more than the minimum if you can.

Low credit limits – Another downside is that credit cards usually don’t offer particularly high credit limits, so if you need to make a big purchase, you may not be able to borrow the sum you need.

Saving or Paying for Debt?

So it’s maybe nothing unexpected that we feel awful in the event that we don’t set cash aside for what’s to come.

In any case, does it bode well? A large portion of us would in truth be in an ideal situation on the off chance that we disregarded the counsel to spare and rather paid off our obligations.

Obligation discuss

Suppose a family has a charge card obligation of £1,000 and reserve funds of £1,000 in a simple get to account.

The loan fee on the charge card is 19%, which implies the obligation costs £190 a year. Be that as it may, the loan cost on the investment account is a negligible 2% net, so the yearly reserve funds premium is just £20 – before assessment (at 20%, 40% or 45%, contingent upon your expense band).

In other words, the family spends more on the debt than it earns on the savings – £170 more to be precise. So, if the family used the money in the savings account to clear the debt, they would be £170 better off a year.

# Tax change

Tax will take a smaller bite from our savings from April 2016, when the Personal Savings Allowance comes into force.

Basic rate taxpayers will then no longer pay tax on the first £1,000 of interest they earn from savings. For higher rate taxpayers, it’s the first £500.

But you should do the sums because you could still save money by not saving money.

The figures are particularly compelling because savings rates are currently so low. The top easy access account pays about 1.65%. Or you can earn about 1.5% in a tax-free cash individual savings account (ISA).

# Interest payments

The interest rates on personal loans, credit cards and overdrafts are usually much higher. The typical credit card rate, for example, is about 19%.

In other words, it is more expensive to borrow money than to save. Anyone with savings who also has costly debts should therefore consider using at least part of their savings to help clear their debts.

It makes sense to always pay off the most expensive debts first – and watch out for any penalties.

If you have a personal loan, for example, there could be a penalty of several months’ interest if you pay off the debt before the end of the loan term. It can still make financial sense to clear the debt, but you have to factor the penalty into your calculations.

The cheapest – and biggest – debt is usually the mortgage. You should therefore only pay off, or pay down, the mortgage if you have cleared other, more costly debts. Otherwise, the same calculation applies.

So, if the mortgage interest rate is higher than the savings interest rate, you should consider cutting down the amount you owe on the home loan.

 # Substantial savings

The savings can be substantial. Let’s assume you have a £100,000 repayment mortgage at 3.5% over 20 years. If you paid just £50 extra a month, you would clear the debt after 18 years and save a total of £4,700.

Penalties often apply if you clear all or some of your mortgage early, although more lenders these days allow you to pay off up to 10% of the outstanding debt each year without penalty.

Alternatively, you could consider an offset mortgage, where your savings are ‘offset’ against your borrowings.

For example, if you have a mortgage of £100,000 and savings of £10,000 you would pay mortgage interest only on £90,000. You can also usually access your savings in an emergency.

# Cheap borrowing

If it’s cheaper to borrow than to save, there’s nothing to gain by paying off debts.

For example, if you have a 0% credit card, you are effectively borrowing money for free. You should therefore keep any spare cash in a savings account where it can earn interest at a higher rate.

# Cash cushion

Some people are reluctant to empty their savings account because they feel exposed without a cushion of cash in case of an emergency.

Many experts also advise people to keep the equivalent of three months’ earnings in a savings account (if possible, of course).

But not everyone agrees – and some advisers argue that your emergency fund could be costing you dear.

Let’s go back to our fictitious family. Suppose they used their £1,000 savings to clear their debt, but then the car broke down. How would they pay for the repair?

Well, they could put the bill on the credit card, or possibly take out a loan or overdraft. They wouldn’t be any worse off, and would probably have already saved money on the interest payments.

Of course, if you don’t have access to credit, it’s a good idea to keep some money in a savings account in case of an emergency. You should also resist the temptation to get into a debt cycle. So, once you have paid off a debt, don’t then go on a spending spree.

# Pension priority

Pensions are possibly the exception to the rule about prioritising debt clearance over saving.

First, there are generous tax breaks on pensions.

Second, your employer might contribute to a workplace pension scheme on your behalf.

Also, the earlier you start to save into a pension the better as your money has more time before your retirement in which to grow.

You should therefore only prioritise debt clearance over pension savings if the interest payments on your debt are critically high.

About Credit Score

# What is my credit score ?

Your credit score is utilized by moneylenders to help them figure out if or not they ought to loan to you. It depends on loads of various things, including whether you’ve been late with or missed any obligation reimbursements previously, and in addition the quantity of credit records you’ve opened before.

You are viewed as generally safe by banks in the event that you have a high financial assessment, which implies any applications you make are prone to be acknowledged. In the event that you have a low credit score rating, then banks will consider you to be a more serious hazard, and any applications you profit are liable to be won’t.

# How is it arrived at?

As well as information from the electoral roll, which provides evidence of your identity and address, your credit rating will be based on how many credit accounts you already have – and how well they are managed – as well as anyone else you might have financial links with. So, for example, if you’ve ever taken out a loan in joint names and they have defaulted on repayments, this could have a negative impact on your credit score.

Any county court judgements (CCJs) made against you, as well as if you’ve ever been made bankrupt or if you’ve had an IVA, will also have a bearing on your credit score.

Lenders will also obtain information from other companies you might have borrowed from in the past to see whether you have missed any payments in the past, or if you only repay the minimum every month.

And they will look at how long your credit history is, so if you’ve been a borrower for a number of years and have always made payments on time, they are likely to look on you more favourably than someone who has only borrowed once or twice relatively recently.

# Why does my score matter?

Lenders actually employ their own scores that you must meet if you want to borrow from them. Each lender will use slightly different criteria and scores required can even vary between different deals offered by the same lender –the best ones needing the best scores.

When a lender accesses your credit score (from one of the credit reference agencies such as CallCredit, Equifax or Experian), it may or may not meet the requirements of that particular lender for that particular deal.

# Where can I find out my credit rating?

You can get hold of a copy of your statutory credit report for £2 from any one of the three main credit reference agencies, Experian, Equifax or CallCredit. You can also pay more for monthly online services which you can access when you want and will send you an alert should anything change on your report.

# How can I improve my credit score?

There are plenty of things you can do to improve your score. First, make sure you are on the electoral roll at your current address, as companies will check this when you make credit applications.

You should also check that any information held on you is correct and up to date. For example, if your report shows a missed payment and you can prove you didn’t miss one, you should alert the company involved and ask them to amend the information on their report. If they don’t do this, you can put a ‘notice of correction’ on your report explaining what happened and why the information in your report is wrong.

# Close down any credit accounts you no longer use, as having lots open could harm your credit rating.

 Don’t make lots of applications in quick succession either, as this will ring alarm bells with lenders. If you are planning on making more than one credit application, space them out, otherwise it could look as though you are struggling financially.

# And finally…

Remember that because lenders calculate credit scores differently, even if you don’t make the grade for one lender, another might still be prepared to offer you credit.

Personal Loan, Is it Works?

# Competitive interest rates

Thanks to low interest rates, taking out a personal loan could be a lot cheaper than you think.

IKANO Bank, for example (which is owned by the family that founded IKEA), is currently offering 3.2% APR representative on borrowing of between £7,500 and £15,000, so long as you repay this over one to five years.

Sainsbury’s Bank also offers 3.2% APR representative on borrowing of the same amount, but you’ll need to repay it over one to three years and apply before 10am on October 6. You’ll also need to have a Nectar card to qualify.

If you don’t have a Nectar card, or you want to borrow over four to five years, you’ll pay 3.3% APR representative.

HSBC and M&S Bank also both offer 3.3% APR representative on borrowing of between £7,000 and £15,000 with HSBC and between £7,500 and £15,000 with M&S. With HSBC you must repay your loan over one to five years, with M&S, this rises to one to seven years.

Should you need to borrow more than £15,000, Sainsbury’s Bank is currently offering 3.2% APR representative on borrowing of between £15,001 and £19,999 taken over two to three years. Again, this is so long as you apply before 10am on October 6 and you have a Nectar card.

If you don’t have a Nectar card, or you want to borrow over four to five years, the rate rises slightly to 3.3% APR representative.

If your borrowing requirements aren’t quite so large – say you want to borrow between £5,000 and £7,499 – rates are still competitive, but tend to be higher. This means if you’re borrowing towards the end of the loan bracket (£7,000, for example), it can sometimes work out cheaper to borrow more and qualify for a lower interest rate.

IKANO Bank offers 4.1% APR representative on loans of between £5,000 and £7,499 repaid over one to five years.

And Sainsbury’s Bank offers 4.2% APR representative on borrowing of the same size repaid over one to three years. You’ll need to be a Nectar card holder to qualify.

# Fixed monthly payments

Another advantage of personal loans is that they allow you to make fixed monthly payments, which means you know exactly how much you’re repaying each month.

Not only does this help you to budget, you can be reassured that once you’ve met all of these repayments, your loan will be paid off in full.

For example, if you borrowed £8,000 over three years with IKANO Bank at 3.2% APR representative and an annual interest rate of 3.15% fixed, you’d pay £233.19 per month for 36 months. The total amount of interest you’d pay would be £394.95, making the total amount repayable £8,394.95. (Note this is a representative example.)

# Flexibility

Personal loans also offer the flexibility of allowing you to choose how long you need to pay back what you owe. So if you’re borrowing a fairly large sum, you can choose to spread your repayments over a number of years, making it far more palatable.

What’s more, some providers, such as Sainsbury’s Bank, offer the option of a payment holiday of two months at the start of the agreement. Be aware though you will be charged interest between the start date of your loan and your first monthly payment.

# What to watch out for

When comparing loans, there are a number of things to look out for before you sign on the dotted line. These include:

– A fee if you choose to pay off your loan early – often this is around two three months’ interest.
– An arrangement fee for taking out the loan.
– You may receive a higher interest rate than the one advertised. This is because the APR is representative so only has to be offered to 51% of applicants.

Also be aware that if your credit score is poor, perhaps because you’ve defaulted on debts in the past or had a County Court Judgment (CCJ), lenders are more likely to turn you down.

It’s therefore a good idea to use our Smart Search tool which will give you an idea of how likely you are to be accepted for a loan before you apply, without leaving a mark on your credit report.

Know The Basic of Loans

loans# What is an personal loans?

An individual advance is otherwise called an unsecured advance and is a method for acquiring cash from a loan specialist, for example, a bank or building society. You pick the sum you wish to obtain and the timeframe you need to get it over inside given parameters. The bank will then choose whether or not to acknowledge you as a client on those terms, in light of your financial assessment.

Unsecured individual credits, with which you don’t need to set up a property as security, are by and large accessible for measures of amongst £1,000 and £25,000 over terms of one to five years – however 10 years is now and then conceivable. Be that as it may, they are for the most part at their least expensive for amongst £7,500 and £15,000 over somewhere around three and five years. In any case, you make standard month to month reimbursements to pay back everything of capital in addition to enthusiasm at the concurred rate.

# What is a secured loan?

With secured or homeowner loans, you have to use your property as security against the loan.  This means that they are only available to homeowners, and that if you default on your repayment you could lose your home.

You can borrow up to £100,000 with a secured loan and the maximum amount of time for repaying the loan is a lot longer at 25 years. Loans of this kind are therefore suitable for those looking to borrow larger amounts. As with personal loans, the repayment terms will generally involve fixed, monthly payments.

# What other types of loan are there?

You may see loan providers talking about car loans or home improvement loans, but there are just unsecured, personal loans by another name.
The same is true of the loans offered by peer-to-peer lenders, the difference being that you borrow from other individuals keen to earn interest on their savings.

# What factors affect the cost of a loan?

When choosing a loan, the first aspect to look at is the interest rate. The higher this is, the more you will pay back overall. And the bad news for people with low credit scores is that the lowest interest rates are generally reserved for borrowers with higher scores because they are seen as less of a risk by lenders.

Other factors to check include whether there are any fees, such as early repayment or arrangement fees that could affect the overall cost of the loan.
Finally, compare loan conditions before making your choice – some are more flexible than others and may even offer the option of a payment holiday of say two or three months at the start of the agreement.

# Will I qualify for a loan?

As explained above, whether or not you qualify for a personal loan will depend on your credit score. If you have a low score, for example because you have defaulted on debts in the past or had a County Court Judgment (CCJ) recorded against you, it is therefore unlikely that you will be accepted by lenders offering top deals.

You can take steps to improve your situation by applying for a copy of your credit report to check all the information held is accurate. You should also stay on top of all your bills and debt repayments. Secured loans can be a good option for anyone whose low credit score makes it hard for them to get a low-rate personal loan – so long as they are a property owner. But remember your home will be at risk.

# What is the representative Annual Percentage Rate (APR)?

The representative APR quoted in loan advertisements is the headline interest rate figure the lender uses for marketing purposes. This does not mean that everyone who is accepted as a customer will pay that rate, though.

Many lenders calculate the APR of a personal loan using a system called risk-based pricing, which means the rate you are offered depends on the strength of your credit profile. And under current European Union rules, lenders only have to offer this rate to 51% of the people they take on as borrowers. The remainder can be offered a higher rate, which they can then choose whether or not to accept.

# What are early repayment penalties?

Early repayment penalties, or redemption fees, are generally charged when borrowers want to repay their loans before the agreed term to compensate the loan provider for the resulting loss of interest.

A typical penalty could be equivalent to one or two months’ interest, although the penalties charged will often fall towards the end of the loan agreement.
Those keen to avoid redemption fees should look for flexible loans that can be paid off early penalty-free.

# What is Payment Protection Insurance (PPI)?

PPI is designed to pay your loan, mortgage or credit card repayments if you fall ill or lose your job. However, the terms and conditions of the cover tend to be very strict and riddled with exclusions. And in the past, lenders have come under fire for insisting that borrowers take out linked PPI policies alongside their loans.

Most providers no longer do this, but if you are offered a PPI policy, it is worth remembering that standalone cover should work out cheaper and will also protect all your debts, rather than just this loan.