Same Day Loans - The Gossip Vs The Facts

We've decided to give you a few facts about same day loans, in order to help you tell the difference between the truth and the rumours.

• The interest rate is actually pretty reasonable, when you look at the kind of product that's actually on offer. They're a short term product, after all. However, they're often described as being extortionate.

If you were to take out a payday loan over a long period of time, that would be a different situation. The annual interest rate isn't actually a fair way of looking at payday loans. The whole point of them is to repay them within a short amount of time. It's a sprint, not a marathon, and should be treated differently. You wouldn't criticise a sprinter because they wouldn't be able to run for miles and miles at that speed.

• They are an easy, short term solution to financial problems. A lot of people think that same day loans are a scam that are aimed at trapping people into long term payment plans. This isn't the case at all.

If anything, credit cards and overdrafts are far more designed towards keeping a debt alive than a payday loan. The interest gained on a payday loan can be high if it's not paid back, but they're designed to be for affordable amounts, and well within line of most people's salaries. Just because the potential exists for something to be misused doesn't mean that this was the intention behind them. Same day loans are, after all, regulated by the OFT. And on top of that, it's not even a viable business plan. It doesn't even make sense.

How do same day loans work?

Here's how they actually work. Just the facts.

• Application: The application is simple, and is usually just one online form. It should only take minutes to fill in and decisions are usually automated and fast. A credit check will usually be conducted, but will not be in-depth or stringent, because speed is of the essence with a product like a short term loan. If the application is approved, the loan is usually transferred the same day, and often within the hour. Some lenders will charge an optional extra for the same hour, but many do not.

• Repaying: This is done via a one-off debit card transaction, which is set up when the loan is agreed to. It's designed to fall in line with your payday and is set up to automatically be processed. You can expect to pay roughly £20 for each £80 borrowed, although it does vary between lenders somewhat.

• Criteria: Not everybody can apply, although a lot of people can. You do need to be employed, aged 18 or over and a UK resident. You may be asked to provide some details of your salary, payday and UK bank account.

James Williams has year of experience in the same day loans industry in the UK, USA, Canada and Australian markets. He is considered a same day loans 'guru' by his peers in the industry.