What are Payday Loans?

The end of the month is Payday for many people. For some, that pay check does not cover the months bills or expenses, which is where Payday loans have been an option to make up the shortfall. But what actually is a Payday loan?

The end of the month is payday for many people

Payday Loans

Payday loans, and more recently high cost, short term “flexible” loans have increased in popularity in recent years. A payday loan is an amount of money, lent for a month at a time, with the borrower repaying the lender on their next payday (hence the name of the loan). Short term loans are very similar but they are usually repaid over a longer period, such as 3 or 6 months.

Payday and Short Term loans are offered by many lenders online including Lending Stream, MyJar, Sunny, QuickQuid and Ferratum, and are used by people in a number of different situations. An example of a situation is when an individual takes out a payday loan as a way to make up shortfalls for their day-to-day living expenses as they have difficulty obtaining more conventional forms of credit (for example, from a bank). The loan is taken out as a temporarily solution.

Unfortunately, payday and short term loans have caused misery for many borrowers. Many have found that when the deadline for their loan repayment is due, many borrowers find themselves needing to extend their loan, re-borrow or increasing borrowing as they are unable to afford the original loan. This creates a vicious circle and repeat borrowing trap, in that the only way to survive and pay all their day-to-day expenditures, is to keep borrowing loans.

At this stage is when the original loan has become unaffordable, and the lender should be aware of the situation. If not, then the lender is “irresponsibly lending” and they should have conducted the correct affordability checks before the loan was lent.

A payday loan is an amount of money, lent for a month at a time, with the borrower repaying the lender on their next payday (hence the name of the loan).

Claiming a Loan Refund

With all types of loans, including Payday loans, it is possible to claim against the lender of each loan, if the loan was unaffordable to the borrower and the loan lender acted irresponsibly.

We understand the pressure that a loans can put on borrowers, especially if it becomes unaffordable. If you have experienced (or are experiencing) a unaffordable Guarantor loan, then you may be eligible to claim a loan refund and the Reclaim Experts can help.