How to use payday loan comparison sites

Comparing online payday lenders is one of the easiest and quickest ways to ensure you are getting a cheaper loan to suit your borrowing needs, whether it’s a small £100 loan for 30 days or a larger cash sum of £1000 for 6 months. Although it may seem more straightforward to just click the first link on Google, not every payday lender provides identical loans and not every payday loan costs the same amount. While high cost short term creditors in the UK are regulated by the FCA, there are only caps on the maximum amount that lenders can charge – not the minimum. So, although a lot of short term loans might cost the same, if you don’t compare your options every now and then, you might not realise you could be getting a cheaper loan elsewhere.

Step 1: What to consider before borrowing

Borrowing can feel like second nature every time something goes wrong, or a bill comes in slightly higher than expected. Some people even use credit for their entirely monthly outgoings, only to repay the full balance at the end of the month. It can be easy to become dependant on credit, neglecting your financial resilience. Sometimes, borrowing is not the best way forward, even if you’re positive you can afford future repayments. Often, it’s better to adjust your current budget, or even consider using your savings in place of credit or to decrease the amount of credit you need. This saves you money in the long run as you aren’t paying back interest and gives you a little more freedom with your disposable income over the next few months.

If you do need to borrow, however, because sometimes it is unavoidable, then make sure you make a sensible borrowing decision:

The Amount

Really think about how much you actually need to borrow. It can be easy to estimate a figure and apply online, but if you don’t apply for enough, you won’t solve your cashflow problem and you’ll still owe a creditor money. If you apply for too much, you’ll end up paying interest on funds you don’t need. Use a calculator if you have to, because applying for the right amount could save you stress and money.

The loan duration

Another thing to consider is how long you need to borrow for. If you only need a little bit of cash, you can probably repay this on your next payday or even over the next three months. If you need to borrow a much larger sum, then you’ll likely need longer to repay as your repayments will be bigger. Your budget is vital here because you pay more interest the longer you borrow. If you can afford to repay the money in a shorter timeframe, you should consider reducing your loan duration to reduce the amount of interest charged. Use the loan calculator on a lender’s website to see how the borrowing time period affects the total amount payable.

The Repayments

It may sound repetitive, but you must make sure the repayments are affordable before you apply for any kind of credit. Missed repayments get recorded on your credit file, and negatively affect your credit score and history. Future lenders can see these negative markers and may choose not to lend to you, which could aggravate your cashflow issue at that time. There are lots of different ways to borrow on the market at the moment, so spend a little time doing some research into each one if the repayments for a particular type of credit are unaffordable.

Step 2: Using loan comparison sites

Loan comparison sites make comparing loans easy. You may already know of the 10 best payday loans, but you would still need to choose between them. Loan comparison sites usually ask for 2 pieces of information in order to find your results: how much you want to borrow, and how long you want to borrow for. Some sites may require you to enter this information into specified fields, others may request you slide a bar or choose your options from a dropdown menu. The search itself usually only takes a few seconds, depending on your internet connection, and the results are typically ranked from cheapest to most expensive. You need to make sure that the top payday loan is actually the cheapest, however, and not a sponsored lender.

You should always browse the list. Some payday loans cost the same even from different lenders, but they may have different default charges or repayment frequencies which could affect your ability to make the repayments. It’s always better to use a payday lender which can adjust the repayments to align directly with your pay dates, to mitigate the risk of missing payments. Even if one lender is slightly more expensive than another, it may be worth using them instead of a cheaper lender if they have more flexible repayment options, for example. While the loan comparison site ranks all their lenders for you, you still need to do a little work in order to solidify your decision.

Step 3: Applying with the lender

Once you’ve chosen a lender, you can usually click on them through the comparison site, and you’ll be redirected to the lender’s application page. Most payday loan applications only take a few minutes to complete, and a lot of lenders use automated algorithms so that you can receive your lending decision almost instantly. This may be another thing you want to compare if you are in urgent need of cash, because lenders who manually review applications might take longer to reach a lending decision and you could have to wait until the next day to receive an answer, especially if you apply outside of their office hours.

If your loan application is approved, most lenders transfer the funds instantly thanks to the Faster Payments Service, but you are often advised to wait between 30 minutes and 2 hours, just in case your bank is running maintenance, for example.

Using loan comparison sites and applying for a payday loan online means you could find the right lender and receive your necessary funds in minutes. But it’s important to remember that although access to credit might be straightforward, deciding to borrow often isn’t. Make sure you thoroughly consider if borrowing is your best option before applying!