How cash loans differ from payday loans
Payday loans are well known; they get advertised on TV and in newspapers, they can be found on the high street in towns across the UK. But there is a similar, lesser known alternative which may suit some people's needs better than a payday loan, they are small cash loans.
These are the types of loans where the lender is represented by a person who goes to the prospective borrower
to sort out the loan and also delivers the money in person, for this reason they're also referred to as doorstep loans.
Similarities
1. Relatively small amounts
When you need to borrow thousands of pounds, a bank is the ideal place to go, but if all you need is a few hundred pounds,
you are unlikely to find a bank that lends such small amounts. Payday lender typical lend up to £1000 and small cash loans up to £500,
both are designed to cater to borrowers who need hundreds of pounds rather than thousands.
2. Quickly issued
You can expect a quick decision on both types of loan, typically on the same day of application. This is possible because there
are fewer requirements and the applicant can be evaluated immediately, unlike personal loans which can take months to arrange.
Key differences
1. Time to repayment
Repayment of a payday loan is required in a short period of time; within a month in most cases, whereas a small cash
loan allows you more time to repay; up to 52 weeks.
2. Method of repayment
Most payday lenders take repayments via direct debit; the borrower provides their current account details and authorises
the lender to take the money from their account on an agreed date. All of the money is repaid in one instalment.
By contrast, repayments on small loans are collected in person, most likely by the same representative that delivered the loan.
Collections are pre-arranged with the borrower and are made on a weekly basis until the loan is fully repaid.
Which one is better for me?
Both types have some advantages but to help you decide, here are a few things to consider:
If you're confident you can repay the money very quickly
If you know you will have the money and can repay the loan within the month, a payday loan is a better option because it
will cost you less in overall interest.
If you have no bank account
In most cases a current account that allows direct debit is a requirement for a payday loan, if you have no bank account
or your account doesn't allow direct debit, the small cash loan may be your only option.
If you want to take longer to repay the loan
If unsure that you will have all of the money in the time required, then it would be risky to take out a payday loan;
the costs in penalties and extensions can easily escalate and become unmanageable.
A small cash loan by contrast allows you to repay in small instalments and you can take as long as 52 weeks or repay early if you need to.