Sometimes hard times sneak up on us. Whether it is due to a change in employment or unexpected bills, financial difficulty can come out of the blue. If you need a loan urgently you may find yourself wondering what your options are.
It can be hard to know which solution is best for your situation with so much misinformation and myths around lending. We’ve put together a list of options for those in need of an urgent loan to help you make the best decision.
Payday lenders are one of the most common solutions, offering a fast loan to those who need it quickly and often.
These loans have a bad reputation and not without reason. In recent years, there has been a lot of bad press about these lenders and the terms they offer. Many people feel these lenders take advantage of those who need a loan quickly.
It is not uncommon for payday lenders to offer loans with APR (the interest you pay on top of the loan) of upwards of 1500%. This can lead to a cycle of taking loans you can’t afford and then taking out extra loans to pay off the interest. Many payday lenders have gone out of business recently due to lending to those who simply can’t pay the loans back with interest.
Doorstep loans have long been a popular loan option in the West Midlands and beyond. These loans are usually done at your home, hence the name. You agree on terms and then the repayments are collected from your doorstep weekly.
The benefit of these loans is that you never have to leave the house. Unfortunately, this can also lead to you feeling pressured into agreeing to terms which make you uncomfortable. As with payday lenders, APR interest rates can see you paying back three to four times the original amount.
Doorstep lending can also be a cover for loan sharking. This is illegal and you should always check whether the person you’re talking to is FCA regulated to ensure they are legitimate.
This is not an option for everyone; however, it is worth considering. Agreeing an arranged overdraft with your bank ahead of time means you have support in place should your financial situation change suddenly.
If you enter the agreed overdraft you will then pay a usage fee until you are out of it. Some people may also consider using an unagreed overdraft from their bank, which isn’t advisable. Although, guidelines have recently been updated to prevent banks from charging higher usage fees for unagreed overdrafts when compared to agreed overdrafts.
Again, bank loans are not an option for everyone, but they are worth looking into. These loans do require a credit check, but a bad credit history – often the reason many people believe they can only get very high-interest payday loans – is not always a deal-breaker. You may be offered a loan with a higher interest rate, though this will be far lower than a payday loan.
Bank loans are often a preferred option as they allow you to pay back the loan over a much longer period than payday loans. Banks are usually much larger and more reputable than payday lenders and may have greater support functions in place if you struggle to repay your loan.
Direct lender loan
Perhaps the best option if you are unable to overcome the credit check barrier for bank loans and want to avoid the pitfalls of other alternatives. Direct lender loans, like those offered by Street UK, are a cheaper, better alternative to doorstep and payday lender loans.
As a not-for-profit social enterprise, our interest rates are far lower compared to those of payday and doorstep lenders. We offer a representative APR of 180%, compared to 433.5% from Morse’s Club and 299.3% from Provident.
You can start your application online and finish it in one of our many West Midlands branches, and we never come to your door, as all repayments are collected via direct debit. We aim to support those who need a loan and can make repayments, but might not be approved for a bank loan, and don’t want to run the risk of a payday or doorstep loan.
To find out more about our direct lender loans, complete our application form below, and we will get in touch!