While the basic concept behind Payday loans remains the same, many new products have been introduced to cater to the growing demand.
Online Payday Loans
As the name implies, an online Payday loan allows for the borrower to fill the application online instead of a physical entry form. A maximum borrowing period of 2 weeks is offered by most lenders in the U.K. The borrowing amount can range from £300 to £1000 and a premium of 20% can be expected on average.
Online Payday loans are the most common type of short term loans issued. It is expected that they will replace the traditional payday application completely within the next few years. Even though the application process is online, most lenders would require proof of employment or a source of income for the borrower. As such, documents such as payroll or past cheques will need to be faxed to the lenders.
No Fax Payday Loans
In essence, No Fax Paydays are the same as online Paydays with one minor difference; there is no faxing of documents required. The lender makes a phone call to the borrower for the required information and verifies it through online databases, adding to the consumer’s convenience. The eligibility requirements for No Fax Paydays are quite relaxed as compared to other types of loans; the applicant just needs to be above 18 and have an income of £1000. However, the borrowing limit is generally lower at about £500. The premium and term period for such loans is the same as for online Paydays. It may take longer for applications to be processed due to verification of income information. No fax loans may also be referred to as Paperless loans.
Instant Payday Loans
Instant loans are online based loans provided as soon as the application is approved. As soon as the application form is submitted, lenders contact borrowers through phone or email for income information and the entire process is completed within 24 hours. Some services even offer bank wiring for an additional fee. The amount that can be borrowed ranges from £100 to £1000, with the premium ranging from £15-£30 depending on the borrowing period.
Instant Payday loans are a good option for people stuck in an emergency without any means of rectification. The amount is available for use on the same day, but the loans can be relatively expensive due to the wiring fee involved. The bank may also charge an additional receiving fee in certain cases. Instant Payday loans are also referred to as 24 hour Payday loans.
1 Hour Payday Loans
If you haven’t deduced it already, 1 hour Paydays are instant loans processed within an hour of applying. The funds are made available to borrowers as soon as the application gets approved. These loans usually do require collateral in the form of a postdated cheque, but some lenders may waive off that requirement. A maximum of £1000 may be borrowed, with the range increasing proportional to the income figure. Like instant loans, 1 hour loans are also expected to be returned within a 2 week period. The loans also have a higher overall cost due to the wire fee.
30 Day Payday Loans
Sometimes, the usual 2 week period just isn’t enough to repay a loan. 30 Day Payday loans take care of that; the term period for such loans is 30 days, with £1000 being the upper borrowing limit. But the same principle of maturity risk applies here; as the borrowing period is longer, so is the premium. The average premium for a £100 loan is £30, making them more expensive than the usual Paydays. There’s also the fact that 30 Day loans may not be processed as quickly. The average deposit time is about 4-5 days.
Bad Credit Payday Loans
Bad credit loans are ideal for people with a spotty credit history or a low credit score. The USP of these loans is that there are no credit checks involved. Creditors already assume that is the case, making the process redundant. All a borrower needs is a valid checking account and proof of income. But since there is an inherently higher default risk for the lender, the premium for these loans is also higher at around 28% of the principle amount. On the plus side, bad credit loans are allotted quicker than other types of loans due to the exclusion of the credit checking process. The term period for these loans is again 2 weeks, but some lenders may offer terms of 3 and even 4 weeks. Bad credit loans are also known as no credit check loans.
Military Payday Loans
Some lending institutions have designed special payday loans for military servicemen known as Military Payday loans. These loans have a very high borrowing limit; up to 35% of the monthly income. They can also be transferred to overseas personnel instantaneously using Western Union. Background checks are also not conducted as the high ethical standing and moral codes of servicemen suffice. Applicants should note that some military charters impose punishment on personnel who are unable to meet their financial obligations.
Low Fee Payday Loans
Low fee loans address one of the major points of criticisms regarding Paydays; the high fees associated with them. The average premium charged on a low fee payday can be as little as 8%, which means the borrower will be paying jus $8 on every $100 borrowed. However, the low fee comes at a cost; lenders for these loans do conduct background checks and approval isn’t guaranteed. The amount also takes longer to be deposited, averaging 1-5 days. The borrowing period is the same at 2 weeks, but unlike other loans, lenders do not usually allow for refinancing.
Credit Based Cash Advance Loan
The terms cash advance and Payday loans are used interchangeably in most cases. Even though they are the same in theory, a cash advance may be of two sorts; a credit based cash advance or an income based cash advance. In case of the former, the maximum borrowing limit depends on the borrower’s line of credit i.e. his credit scores and past credit history. An income based cash advance determines the maximum borrowable amount based on the income of the borrower. While both are viable options, most people prefer to go for income based advances as they are easier to acquire.