Same Day Unsecured Loans
Introduction
A same day unsecured loan, as the name suggests, is a loan that requires no security or collateral – and usually no credit check – and is available immediately, or at least within a few hours. Often referred to as a "payday loan", a same day unsecured loan is typically for a small amount, say, between £100 and £1,000, repayable over a period of between 1 and 30 days. With an estimated 65% of British consumers facing a shortfall at the end of each month, because of poor money management skills, or the rising cost of living, or both, many find that same day unsecured loans are an essential way of making ends meet.
Same Day Unsecured Loan Considerations
A same day unsecured loan is, essentially, an advance on your salary, and is structured to be repaid as soon as your next salary payment arrives. The characteristics of a same day unsecured loan – in terms of availability, repayment period and the perceived risk to the lender, in the absence of a credit check – means that interest rates are much, much, higher than other forms of borrowing. The APR, or "Annual Percentage Rate", is usually a useful method of comparing one loan product with another, insofar as it reveals the "true" cost of borrowing, including interest and fees, over a 12-month period. It is not quite so useful in the case of same day unsecured loans, however, because although the APR quoted may be as high as 1,000%, or more in some cases, the term of the loan is short enough that you are never – or, at least, should not be – exposed to such astronomical interest rates. It does mean, however, that you are likely to face repaying an additional £25, or £30, for each £100 that you borrow, even allowing for the shorter term of the loan.
Same day unsecured loans are designed as a "quick fix" for temporary cash flow problems, and need to be repaid quickly. An obvious danger occurs if you are unable to repay a same day unsecured loan at the end of the agreed period, and need to "roll over" some, or all, of the original amount into the following month. Same day unsecured loan providers apply a charge, which is added to the original principle, in this eventuality, and the new total continues to accrue interest at a very high rate. It is possible, therefore, if this process continues from month to month, that your debt may spiral out of control in a very short period of time. In fact, a typical same day unsecured loan for £750 may cost you an additional £900 in interest charges and fees if payments are rolled over for a total of 5 months. A same day unsecured loan should, therefore, only ever be considered as a short term solution in circumstances where you are 100% certain that funds will become available to repay the loan amount, in full, at the end of the agreed period. Although the British Cheque Cashers Association reports very few complaints from borrowers about same day unsecured loans, the OFT ("Office of Fair Trading") has launched an enquiry into the treatment of customers by some loan providers.
Not all same day unsecured loan providers are the same, so make sure that you choose a reputable, regulated, lender, whatever your financial situation. Try to make a calm, measured decision regarding your loan provider, rather than being panicked into accepting the first loan deal that you see; entering into an agreement with a loan shark or rogue "doorstep" lender, for example, may well pose a risk to life and limb, as well as your financial future, if you cannot repay your loan on time.
To be eligible for a same day unsecured loan, you typically need to be over 18 years of age, employed and have your wage or salary payment paid directly into a bank or building society account. Another alternative may be to send a cheque, post-dated to the date on which repayment is due to the loan provider; in either case, however, you will also be required to supply proof of employment. If all is in order, you can usually expect funds to be paid into your bank account within a few hours.
Same day unsecured loans are not without their pitfalls, as previously discussed, and may not be suitable for everyone. If you are in any doubt about their suitability for your own financial situation, free, independent advice is available from charitable organisations such as the Citizens' Advice Bureau, or the CCCS ("Consumer Credit Counselling Service"). Above all, if you do commit to a same day unsecured loan, remember that it is imperative to meet the repayment date, which means that you need to plan, and readjust your finances accordingly.