If you have, you need to check again because they do not exist! The notorious ‘payday lending’ offers a strictly short term option and if you find yourself in a position where a 1 month payday loan becomes a 2 or 3 month loan, charges will quickly begin to get out of control.
In the article below we highlight 5 options currently available which are more effective and just as importantly, affordable.
Option No. 1 – Loans with a guarantor
In stark contrast to strictly short term (and high risk) payday lending, this type of finance offers a low risk, long term option for anyone who has a poor recent financial history.
Designed to allow a 3rd party to ‘guarantee’ the repayments, this option is typically available over periods of up to 5 years and for sums of up to £10,000. They are also significantly cheaper than many of the current alternatives.
If you opt for a longer term repayment period, you will have the ability to spread your repayments over a number of months, whilst keeping the amounts to a manageable level.
Checking the small print
Loans with a guarantor lenders are also renowned for being far more upfront in regards to the terms and conditions relating to their products than some of their counterparts.
A recent article in the Independent explored just how dangerous accepting a loan without knowing all of the relevant details can be. Read on for further information.
Option No. 2 – Using an existing credit card
Another option may involve asking for a temporary increase on the limit for one of your cards.
However, this is another relatively short term option and you must try to make the repayments as soon as possible. Due to the high APR (Annual Percentage Rate) associated with many cards, any delay in clearing your balance could result in debt quickly beginning to mount and becoming difficult to reduce.
Option No. 3 – Using an authorised overdraft
If you have a current bank account, it may be possible for you to apply to your bank for either an authorised overdraft (if you do not already have one) or an overdraft extension (if you do).
The interest charged on overdrafts can be up to 19.5%. (Source: Money Advice Service). Whilst this may seem a little expensive, assuming you stay below the pre-agreed limit, an overdraft will still offer a far cheaper and longer term option than some of the riskier options which are currently available.
Please note – It is essential that you do not slip into an unauthorised overdraft as this can often prove to be extremely expensive.
Option No. 4 – Interest-free borrowing from the social fund
If you are currently claiming benefits, you may be in a position to submit an application for an interest-free budgeting loan from the Local Authority social fund.
However, there are a number of stringent criteria which must be fulfilled in order to become eligible. For more information, please check out the article below.
Option No. 5 – Help from your Local Welfare assistance scheme
Should you find yourself experiencing severe difficulty in paying for essentials such as food, heating and clothes, you may be eligible for help from a local welfare assistance scheme.
These schemes vary from area to area and can provide assistance in a variety of ways, for example, vouchers, pre-payment cards, furniture or white goods and food banks.
If you are based in England, you can find your local welfare assistance team by visiting the link below:
Accessing your current rating?
Before assessing your available options, one of the most important things to do is to obtain an up-to-date credit rating. This is important because the level of your rating is very likely to dictate the number of options which you have available.
Rather than paying the major UK credit reference agencies a call (all of whom may have slightly different information resulting in varying scores), simply visit Checkmyfile to obtain the UK’s only multi-agency report.
Don’t fall into this trap
No matter how desperate things may seem, there are always cheaper options available than payday lending.
By using our calculator below to work out how much you can comfortably afford to borrow, you will then be able to use our application form to make submissions to a number of the UK’s most reputable lenders.
Within minutes you will begin to receive no obligation offers which offer significantly better value than some of the more expensive options currently available.