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When you avail for a quick payday loan, you are agreeing to a short-term, unsecured loan where the application is free, easy, and quick. It only takes a few minutes to submit your application and an approval response takes just as instant. Once you’re approved, it takes less than a couple of days for your money to be transferred directly into your bank account. Mostly, you are given until your next payday to pay back the loan and some additional fees including interest rate that the lender charges. If you, or someone you know, are contemplating on taking a payday loan, there are certain universal rules and guidelines that might prove useful in the event and this article will talk about them in detail.

A loan can only be rolled over Twice
If you have already reached the deadline in paying back your loan but still don’t have the money to repay it, you have the option to roll it over to the next month. This added flexibility, however, can be a curse more than a blessing because rolling over a payday loan balance for another month incurs further charges and this can quickly turn a small short-term loan into a prolonged costly debt. To prevent this from happening, the FCA or the Financial Conduct Authority, implemented a cap on extending loan payments permitting only two rollover options before the balance will be due. This protects borrowers from getting into a spiral debt but still leaves some flexibility if ever there is a necessary need to extend a loan.

Lenders Can Directly Collect Payment From Your Bank Account
You need to be aware that lenders have the power to take money from your bank account if they wish to, as a means to ensure repayment, through the CPA (Continuous Payment Authority). This gives the lender a quick and flexible means of collection and secures the borrower from taking in additional charges from missed payments. But while it is the lender’s responsibility to inform you if they intend to take payment from your account, not everyone will and this can lead to some serious financial problems especially if the money that has been collected in advance was intended for paying off important bills like mortgage or rent.

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CPA Limitations

The good news, however, is that the CPA has limitations. Lenders are only allowed to collect money from your bank account twice and there is also a cap on how much money they will be able to take out. They are not allowed to empty your account if does not hold enough money to pay the loan in full allowing you to pay off other essential bills and keeping you at a safe distance from the danger of getting into further debt. The lender will also need to ask for your consent if they wish to take out an impartial amount from your bank account if the money is not enough for full repayment of the loan. It is important to know that this limit can be reset once you decide to roll over your loan or refinance your credit.

You have the right to be informed
It is also a payday lender’s legal obligation to inform you about the different risks involved in availing for their loan. A clear warning must be given to borrowers in the event of late repayments and violation of agreed terms and conditions. If you see online lenders who do not display clear warnings on their website, you can report them to the FCA right away. They are either irresponsible lenders or scam artists and the world is better off without them.
You can get free financial advice from your lender
Payday lenders are also obliged to help you on how and where you can get free debt education and advice once you decide to refinance or roll over your loan. This is designed to provide proper guidance on borrowers on how they can properly manage their credit, protecting them from suffering the risk of a spiraling debt. In the event of an extended loan payment, the lender will have to offer you with a genuine information sheet that shows debt advice providers that are free of charge.

Payday loans can become a portal to a financial nightmare especially if a borrower is uninformed on the possible costs that he will have to shoulder once he decides to use it. If you are contemplating on availing for one, you should know that you have the right to be informed and educated and the lender is also responsible for helping you pay off your debt without sacrificing your financial ability.

Representative Example:
305.9% APR. £400 borrowed for 90 days.
Total amount repayable is £561.92 in 3 monthly instalments of £187.31.
Interest charged is £161.92, interest rate 161.9% (variable)

Please note:
Loanora is NOT a lender – we are a licensed broker working with the most popular direct lenders in the market to find you the most suitable short-term loan plan. Our FREE quoting service compares more than 40 lenders quickly and finds you a lender with the lowest rate that they are willing to lend to you today.

Rates from 45.3% APR to 1575% APR – we provide a no obligation quote, your APR will be based on your personal circumstances