As with virtually every other financial product, guaranteed payday loans have their good points and their bad points. Before they can be looked at though it is beneficial to explain exactly what a payday loan is. So, in simple terms a payday loan is a very short term loan that you can take out to provide additional cash until you receive your next pay cheque/wage packet from your job. They are aimed primarily at people who have short term financial difficulties e.g. people who have unexpected payments to make or those who have been between jobs for a while and need an additional income until they receive their first wage from a new job.

Basically, you apply for a payday loan and if approved you can have the money in your bank account within a few hours. Then, when you are next paid from your job, the payday loan company reclaims the loan amount from your account and that is that. One of the downsides of payday loan companies is that they charge a high fee for lending you money and when they reclaim the loan amount they also take their fee as well.

In general, most payday loans range from £50 through to £750 however some companies will make exceptions if you can prove you can pay the amount back and the additional fees on your next pay day. The average fee rate for payday loans is £25 for every £100 you borrow and this needs to be considered carefully before taking out a loan. So for example, if you borrow £500 for a maximum of 3 weeks (until you next get paid) then you will charged an additional £125 on top - making your total payment £625.

How do Guaranteed Payday Loans Work?

If you do need to take out a payday loan and you think there's a chance you won't be able to pay on the due date then make sure you read the company's terms and conditions first - so that you know exactly what will happen and what additional charges you'll incur should you default on payment.

The Benefits of Payday Loans

Even though they are expensive to take out, payday loans do have their benefits. For example, they provide you with virtually instant cash which is perfect for emergencies e.g. if your car breaks down and has to be towed, if your boiler breaks down, if you pet becomes ill etc. Providing you are accepted during the loan application, which incidentally can normally be done online, you can have the loan money in your bank account within 12-24 hours.

Another benefit is that payday loan companies don't base their decision on your credit history or your current financial status. In most cases all the lender wants to see is proof that you have a permanent job, you get paid either monthly or weekly and that you have a UK current account. This means that it doesn't matter to much if you have a bad credit score or a poor credit history - you can still be approved.

The Drawbacks of Payday Loans

As already mentioned, payday loans are an expensive option and should only be considered for emergencies. In addition, the payday loan company will try to debit the loan amount from your bank account on the agreed day and if you don't have sufficient funds then you risk being charged by your bank for the refused debit and by the loan company for non-payment. If you are considering a payday loan then make sure you can pay the loan amount plus the fees on the agreed date.

Where to Find Payday Loans

There are numerous internet based lenders to choose from, many of which offer very similar fee rates and terms and conditions. You should read all terms and conditions carefully before making a choice as a few companies are slightly more lenient with regards to late payments and non-payment. A Google search will provide plenty of choice however the first few are probably the most popular and so they are worth looking at first.

One thing to remember with payday loans is that they are only a short term solution and if they can be avoided then they should be. The fees alone equate to an APR of over 1300%. Saying this they are a good solution for those emergencies you weren't expecting and they can make a huge difference in a lot of cases. If you are positive that you can pay the loan amount and the fees back on your next pay day then this type of loan is a viable option and well worth considering. Search around on the internet and look for any special offers that may be running as even payday loan companies need customers.