PayDay and Short Term, what's the difference, if any?

pacpac2018

Hi, is it correct that companies like Sunny, Peachy and QuickQuid offer PayDay Loans (which I understand is surely not good on the credit file) and companies like Satsuma and !!!!!!!!!!!!! offer Short Term Loans. If so, what is really the difference between them (other than any difference in T&Cs)?

[Deleted User]

Both are frowned upon

sourcrates

Payday loans don`t really exist any more, the fact that you had to repay the full amount, on your next payday, was the massive stumbling block with that one, logic dictates if you don`t have the funds this month to manage, then how are you going to repay the loan and manage the rest of the next month ?

Of course the answer was you couldn`t, and that led to a whole lot of people getting caught up in rolling over their loans etc.....and the rest is history.

These companies now offer loans over different time frames, usually a set number of months, to make them more affordable, but all of them are what is known as "sub prime" lenders, and the big banks don`t like to see them on any credit file, as it suggests to them you cannot mange your money very well, which is not always the case, but there you go.

However if you have negative information on your credit file, and you want a loan, you have little choice but to use them, as the main lenders will not even look at you, the system does nothing to help you in that senario.

pacpac2018

So, if the credit file is just fine, no defaults, no missed payments, no CCJ's etc, it is just fine to take up such loan and manage as per T&Cs? I can think of several situations where this could make sense, and these situations have nothing to do with not beeing able to manage credit or irresponsible borrowings. It is just expensive monies, and that is another question alltogether.

sourcrates

pacpac2018 wrote: »

So, if the credit file is just fine, no defaults, no missed payments, no CCJ's etc, it is just fine to take up such loan and manage as per T&Cs? I can think of several situations where this could make sense, and these situations have nothing to do with not beeing able to manage credit or irresponsible borrowings. It is just expensive monies, and that is another question alltogether.

The thing is you don`t know the acceptance criteria of individual banks, they may not frown, as Gary puts it, on the type of loans these companies now offer, or it may be built into their automated decision making process to check for loans such as this, we don`t know.

There will always be prime, and sub prime lenders, each cater for different markets.

PixelPound

short term loans are subprime loans because the APR is usually very high, and frown upon because they indicate an inability to manage finances. Think about it the APR is usually several hundred percent or more. You are often better to get a credit card, there are even some companies like Hitachi finance who offer variable rate loans, so you might be offered a loan at say 50% that has a headline rate of 3%. It will show under the standard loans rather than short term loans.

Kentish_Dave

If your credit file is fine do you really need to go to this sort of lender? Can’t you get an overdraft, or better still, save up to get what you want?

pacpac2018

This is mostly for educational purposes, to getting into the know of how things are working. I monitor/check my credit file, and note it is mostly updated on a monthly basis. Would it be correct to assume that the lenders will access a more up-to-date file? If so, what is the update frequency? Also, when a credit line is closed/settled, will that appear on the file pretty much immediately?

[Deleted User]

Lenders update the CRA’s on a monthly basis.

They see a real time view of your report.

boo_star

pacpac2018 wrote: »

So, if the credit file is just fine, no defaults, no missed payments, no CCJ's etc, it is just fine to take up such loan and manage as per T&Cs? I can think of several situations where this could make sense, and these situations have nothing to do with not beeing able to manage credit or irresponsible borrowings. It is just expensive monies, and that is another question alltogether.

Absolutely not, no.

You'll probably struggle to get a mortgage at all if you've taken out a "short term" loan in the past year and will be severely restricted in your choice of mortgage lenders if there's any evidence of one of these loans on your file past that. I'd be surprised if other forms of lending weren't adversely affected by the presence of such loans on your file too.

They are absolutely a loan of last resort. Avoid them unless you really, REALLY, have to.