Payday Loans and What they are Used for

Payday loans have long been a favourite amongst consumers for a variety of different borrowing needs. It is only in recent times that payday loans lenders have started to request that customers give a reason for borrowing and previously this information was not recorded as part of the application process. The reason for using a payday then, will vary from one customer to the next. Payday loan borrowing is part of the short term borrowing market and this means that the loans available are small in nature. Typical payday loans will be available for amounts starting at £100.00 and going up to £300.00 for those who are applying for the first time. There are plenty of lenders who will consider higher loan values, up to as much as £750.00 for example but often this will come should a new loan be granted in the future, following successful repayment of a smaller loan. It would be fair to say then that payday loans are not designed to be loans which are used throughout the year and as an on-going form of credit, like a credit card. So what exactly then, are customers using these loans for? It’s an exciting question considering the market has now been in operation since the early 1990’s and served many millions of customers along the way.

Used for Payday Loans 

Given the value of payday loans it would be sensible to think that consumers are using them for small costs rather than large ones. Where someone might consider a bank loan for a new car, a payday loan by comparison would not be the right choice in this example. The same applies to the resource which is offered by credit card suppliers as they are also designed to serve different customer needs. Credit cards operate on a credit limit basis and this means a customer can be approved for an amount of money, available indefinitely; providing minimum repayments are made and the limit is not reached. So where a credit card may allow a credit limit of anything from £200.00 to £10,000.00, the customer will have access to funds providing the card is being managed correctly. This is then another example of how different the resource of payday loans is by comparison. Payday loans remember are paid via a number of pre-agreed monthly repayments.

The type of costs being covered by payday loans then could be anything which is small in nature but equally, is not likely to reoccur month after month. Examples might include a broken home application, like a freezer or washing machine. They may be a need to repay for a school trip which had slipped the mind or perhaps the requirement to pay a vet bill for the beloved family pet. All of these costs are small and we would all hope are of a ‘one-off’ nature; in that they may arise but not each and every single month. Perhaps then, these are the type of costs which payday loans are being used for.