What You Should Know Before Applying For a Payday Loan
Payday Loans are loans that are usually needed for a short period of time for a limited amount of money. You can apply for a payday loan online or on high street shops.
Payday Loans are usually easy to get approved for but with such high-interest rates you will pay back quite a high amount above the original amount borrowed.
If you want to go ahead and get a payday loan, you will do well to shop around to find the best deals. Check the interest rates and charges before you make an application. Make sure you fully understand the risks involved in the event you cannot pay back the loan in the required time.
Before You Apply For A Payday Loan
When you make an application for a payday loan, the lender should make sure you can afford to make the repayments. The lender should ask for proof of income to ensure you can meet the requirements of the loan.
The lender is also responsible for ensuring you understand the features of the loan. They will need to tell you how much you have to pay back, the interest rate and what can happen if you can’t pay back the loan. They will also need to explain any fee’s associated with late payments and mention that a payday loan is not a long-term lending solution.
As of the 02/01/2015 lenders have been capped at the amount of interest they can charge at 0.8% and that no one taking on a payday loan can pay back more than double the initial amount borrowed.
Make Sure You Keep Up To Repayments
With payday loans, lenders will stipulate that you must pay back the debt within 30 days plus the interest.
Most people will pay the loan back via their bank card. When you accept the agreement and get the loan, the lender will take the money from your bank account. This is known as a continuous payment authority or CPA.
If you do not have the required funds in your bank account to cover the repayment, the lender will keep asking your bank for repayment or part of it. You will incur charges from the lender and possibly from your bank.
Its worth noting that the lender should not try to use the CPA more than two times if they have been unsuccessful in getting the money from your account and should not try and take partial payment.
As of 02/01/2015 if you get a 30-day payday loan and make the repayment on time you will not be charged more than £24 in interest and fee’s for every £100 borrowed. If you don’t make the repayment and default the lender can only charge a maximum fee of £15.
Roll Over Loan
If you have difficulties making the repayment, you can contact the lender. They may be able to offer an extension of the repayment period. The lender may choose to give you more time to pay or doing what’s called a roll over the loan. A roll over loan works by the lender making a new agreement for the loan. Please note that extending the loan or doing a roll over will mean you have to pay more back and the lender will add-on more interest, fee, and additional charges.
The lender should not roll over the loan not more than two times. When lenders roll over the loan, they will need to give you additional information with debt advice and contacts details of relevant agencies to help you.
Your Rights To Complain
Payday Loan Lenders are required to follow the Good Practice Customer Charter and the rules of Financial Conduct Authority. If they don’t follow these two guidelines, then you have the right to complain.
You should contact the lender first and try to resolve the issue.
In the event the issue cannot be resolved, you can file a complaint with the Financial Ombudsman. You can also contact the trade association to complain If the lender is registered with them.