Before we start learning about how do they work, we need to have complete knowledge about what they are.
Payday loans: also known as short terms loans or cash advance loans; these are loans that are linked to the payday or salary day of the borrower. The repayment of the loan is made on this day as it is. These can also be referred to as salary loans, and these are given to those employees who have previous payroll and employment records.
Some of the payday loan giving companies also fix a day for the repayment rather than fixing the salary day for it. This day can also be fixed according to your own choice.
You may also apply for a loan for a more extended period and pay it back in installments. But this option is not always available.
How does it work?
To apply for a payday loan, you need to have a proper employment report, and it must be a good one. Once you have this, you are eligible to apply for a payday loan. Payday loans do not require much of the documentations but are strict with the repayment rules. While applying, you need to link it with your payday or salary day. Now, once you have applied for the loan soon, it will be approved. After approval of your payday loan, the loan amount is directly paid to your bank account. At the end of the month or the fixed payday, you will have to repay the loan with full interest and applied charges. If you do not repay it on time high amount of charges can be applied as interest and can cause a financial imbalance for you. Generally, the payday is fixed as the deadline for the repay, but you may get a chance to fix another day as the deadline according to your convenience.
How much are the charges and the interest amounts?
Working under the rules of the Financial Conduct Authority, the payday loans can ask from you a limited amount of interest and charge fee. It will be no more than £24 for a loan for 30 days. The charges are applied per £100 borrowed by you. If you do not repay the amount on time, you may be charged with an extra fee of £15.
What are recurring payments?
These are also known as Continous Payment Authority.
When you apply for the payday loan, the lender will ask you to set this Continous Payment Authority to let them control the repay payments.
How does the recurring payment or Continous Payment Authority work?
The payday loan lenders take back the repay amount or money will all the interest and fees directly from your bank as soon as you get your payment in it. This way, there is no chance of delay in the repayment once you have got your salary. This method helps you repay the loan without any procedure and banking work.
Mindfully using the information about all the discussed aspects, the payday loan is a great one for all the employees.