If you are looking to borrow some money you will soon realise that there are many different kinds of loan. It can be rather overwhelming trying to compare them all and to work out which one will be the best for your needs. There may be traditional loans that you understand as you have come across them before. However, some of the newer ones, such as payday loans, you may not have a full understanding of. It is worth making sure that you do know what makes it different to other loans as this will help you to decide whether it is one that you should consider or whether it will not fulfil your needs. There are a few main differences which it is worth getting a grasp of:
- No credit check – most lenders will do a credit check and will only lend to those that have a good credit record. All lenders have different criteria for how they judge borrowers though, so it is not always easy to tell whether you have a good credit record or not. This could mean that you might be worried about being turned down for a loan because you do not have a credit record that is good enough for that particular lender. With a payday loan there is no need to worry about this. There is no credit check and so you will never be turned down because of what that credit record says and therefore you will not have to worry about it at all.
- Arrange quickly – a payday loan can be very quick to arrange compared to other loans. You might even have the money within a few hours in your bank account ready to use. This is significantly quicker than many other types of borrowing. If you need the money really quickly then this could be an advantage of this type of loan that will be really important to you. It is wise to compare the payday lenders though on this. You may find that some will be able to get the money to you a lot quicker than others. Therefore, make sure that you check as if speed is really important you will want to pick the quickest one. You do need to bear in mind though that you will need to send them the required documents quickly and give them all of the information that they need before they will be able to process the loan.
- Borrow small amounts – with many loans you can only borrow in excess of £1,000. This can sometime mean that you are borrowing a lot more than you really need. This can only be costly but it can be a burden. It can mean that you are repaying the loan over a long time as well. You might prefer the fact that with a payday loan you only borrow small amounts. This means that you will not need to borrow extra and therefore you will not take so long to repay it. You will also not have to pay extra interest for having money that you did not need.
- Repay quickly – with a payday loan you will need to repay very quickly. You pay back the loan on the day that you get paid. This means that you should have plenty of money available to repay it. It also means that you only stay in debt for a few weeks. If you dislike the idea of being in debt then this is ideal as you will not be in debt for very long. It is also good if you worry about having to make lots of regular repayments on a loan. You will just make the one repayment and the loan will be gone.
You can see that it has some features which are different to those that you get with more traditional types of loan. This could mean that it will be more suitable for you than other types of loan that you could choose from. It is therefore worth thinking about what you want and need for a loan. You will then be able to look at the main features of a payday loan and work out whether it will be the right loan for you or whether it might be that there is a different type of loan that will work out better. You may find that there is not a loan which completely matches your requirements, but by having an understanding of the main features of all types of loan you will be able to pick one more easily and then be sure that you have the one that suits you the best. Once you have done this you will be in a position to compare lenders and find the loan which offers you the best value for money.