Payday loans are a special type of short term loan. They are designed to get you through to your next pay day should you find yourself short of money and unable to live comfortably. You borrow a small amount of money � generally between �80 and �750 and repay it when your next paycheque or your salary goes into your bank account. While the thought of a pay day loan is comforting, there are some drawbacks to this type of cash advance, the most important of which is the interest rate that payday loan companies charge.

The Benefits of a Payday Loan
Payday loans are also known as �fast cash loans� because the money you ask to borrow is deposited into your bank account within 24 hours of the loan application being approved. Once you have the money in your account, the terms of the loan begin and you�re normally expected to pay back the full amount plus fees within 30 days. This is generally done by direct debit straight from your bank account. Some loans can be spread over 60 or even 90 days but you do end up paying more in fees if you choose this option.

Payday loans are not based on your past financial status and credit checks are never done. This means that even if you have a poor credit history or no credit history you won�t be automatically turned down. All you need to show is that you have a permanent job and get paid on a monthly or weekly basis, and that you have a valid bank account.

This type of loan is ideal for emergencies because you get same-day funding. They aren�t advisable for non-emergencies though as the fees are very high when compared with other unsecured loans.

The Drawbacks to Payday loans
The main drawback with regards to payday loans is the fees that are charged on the money borrowed. The majority of companies charge �25 per �100 borrowed which equates to an APR of 1311%. So, if you borrow �500 for one month your repayment will be �625. Repayments are normally debited straight from your bank account and if you can�t pay you incur further charges and possibly worse. It is very easy for payday loans to get out of control and any additional charges make them virtually impossible to ever pay off.

Eligibility for a Payday Loan
To be approved for a pay day loan you need to meet certain criteria. Each individual company will have their own conditions however the majority will require you to satisfy the following prerequisites as a minimum:

• You need to be 18 years or over at the time of the loan application,
• You will need a UK residential address,
• You will need a UK bank account that has direct debit facilities,
• You will have to be in full time, permanent employment. A few companies will also specify that you have to have been in your current job for a minimum of three years.

Payday loans should be the last resort with regards to borrowing money and if you have any other way of raising the money you require then that option should be explored first.