How to Borrow a Small Amount of Money

Saturday, May 2, 2009

Need to borrow a small amount of money? £100? £200? With a payday loan it's possible to borrow a small amount such as this. Most people need a £100 loan or £200 loan to get them through to payday - hence why they are called 'payday loans'.

 

How They Work

Typically you will email/fax/post a recent bank statement, signed paperwork & a post-dated cheque to your payday lender. Then they will deposit the money straight into your bank account. When it's your payday the payday lender will cash the cheque, taking back off you the amount you borrowed, plus some interest.

 

An Example

You need a £200 loan for a week. So you send a £230 cheque to a payday lender dated a week later. They then pay £200 into your account. In 7 days they cash the cheque, taking the £230 from you.

 

This type of loan is primarily aimed at people who need money over a very short period of time. When compared to a personal or secured loan the APR is much higher. But APR isn't a good way to compare them, as it takes much longer to have the money deposited with a personal loan. As you typically borrow over only a few days with a payday loan you usually don't pay more than a few hundred pounds back in interest. With a personal loan paid back over several years you can end up paying thousands of pounds in interest. Remember to look at the pros & cons of whichever type of finance you are about to take out. Take care with payday loans - if you find yourself getting into a constant spiral & taking out loan after loan then you need to look at your finances.