In the previous blog post we explored what makes payday loans a form of short term borrowing. Actually, only one factor was considered, that of APR. It was concluded that if one were to design a short term loan, the APR would have to be high so as to avoid people taking it out in the long term. And on the other side of the same coin, the high APR makes it only suitable as being a short term loan. There were also other factors that made short term loans effective in the short term.

Short term payday loans means no faxing of documents required

From now on we will look at payday loans as a form of lending that was designed to be done in the short term. At the same time though, we will also look at why these features are less appropriate for a long term loan. The first of these factors is the fact that Payday Loans UK does not perform a credit check before making a decision on the loan.

In designing a short term loan, you want it to take as little time as possible to make the decision. Taken from this perspective then, a credit check would take too long to make it appropriate for a short term loan. However, this also makes sense for short term borrowing in a way that it does for a normal bank loan. That is not because short term lenders are not concerned with whether people are likely to pay back the loan. Rather, it is because over the shorter term there are less factors that will get in the way of being able to pay back the loan. There will naturally be challenges over a long period of time for paying money back. A credit check will assess how reliable you are at overcoming those challenges. However, over a short period of time, there is far less chance of mitigating circumstances getting in the way of you paying the loan back. That is why we only ask about your job, whether it pays over a certain amount and if it pays monthly. If these two conditions are satisfied, then we judge that you have the ability to pay back the loan.

As already stated, not needing to make a credit check also saves time. This is also a big part of not asking for documents before a loan is approved. That is the “no-fax” part of the payday loans offered. This is a time saver, and also makes the application process more convenient. And again, being a short term loan, less of these checks are required.

That covers the main parts of payday loans, and what makes them appropriate as a form of short term borrowing. The first part showed why the high APR rates were appropriate and necessary for short term loans. The second part explained how this meant that the application process naturally becomes quicker and more convenient, perfect for short term loans. The upshot of this is that payday loans can be taken out quickly, and for any purpose, with a very fast turnover.

Tags: APR, credit check, loan, no fax, Payday Loans, Payday Loans UK, short term borrowing, short term loans

Written by tZiegler

Tony Spiel has years of experience in financial matters, especially in the payday loan market. In his off time he is a keen scuba diver.

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