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The UK’s smart alternative to online payday loans

LLooking for a payday loan? We’d like to tell you about SafetyNet Credit, the UK’s smartest new online alternative.

General Questions

What is a payday loan?

A payday loan is a type of unsecured, short-term loan, and one which is typically modest in size compared to other types of credit (generally speaking a payday loan will be between £50 and £500). They are designed to be repaid in a short period, almost always within the first month after being issued.

Though this type of lending has existed in some sense or other for centuries, payday loans began to take their modern form in the United States, during the late 19th century. City labourers would often use them to cover the short period at the end of the month when they may have run out of money due to bills or other expenses. This was a time long before most people had any access to financial products like overdrafts, or even bank accounts. As such, an entire industry grew up around issuing small amounts of credit to workers, with these loans being paid back upon receiving their next monthly or weekly wage, hence the name ‘payday loans’.

Over the next century this industry gradually developed into an established part of the financial landscape in the US. In the 1990s many of these American companies then began to expand into the UK financial market. Over the last decade, with the advent of new online technology allowing for the streamlining of many aspects of the assessment and administration processes of this type of loan, the payday industry here has experienced significant growth and expansion.

How do payday loans differ from other types of loan?

As already mentioned, the primary difference is that payday loans tend to have a considerably shorter period of repayment. Because of the short-term nature of the loan, they are also characterised by a smaller amount of credit initially being made available, as well as a relatively higher APR (‘Annual Percentage Rate’) than other, more traditional types of personal credit, such as bank loans or credit cards.

There are some other features which distinguish payday loans. The contemporary payday loan industry is characterised by credit being applied for and issued predominantly online. They are also distinctive for having relatively very short approval periods, with many aspects of the process now being automated. This reflects the fact that payday loans are designed to be used for those unexpected expenses which leave us in sudden need of temporary funds.

When is it appropriate to take out a payday loan?

As just mentioned, payday loans are designed to help with immediate, essential expenses that you likely weren’t expecting, a cost which might be very urgent but which you are temporarily unable to cover until your next wage comes through. An example might be paying for car repairs not covered by insurance after an accident or breakdown. You may need to regain use of the car as soon as possible for travelling to work, but do not have the funds available to cover the repairs right away. If you are certain you will be able to repay the loan and its interest within the agreed time, then taking out a payday loan could be suitable in this situation, as it is may be cheaper than the bank charges caused by going into an unauthorised overdraft.

There are many instances when it would not be appropriate to take out a payday loan, however. The most serious case would be using one or more payday loans to service existing debt, perhaps even to cover previous payday loan repayments. This is a recipe for disaster and could lead to debts becoming less, not more manageable. In these situations, proper financial advice should be sought.

Other instances would include using payday loans for recurring or non-essential things, such as expensive nights out every weekend, luxury gifts, holidays or gambling. Like using additional loans to service previous debt, using payday loans in this manner is not recommended, as it can quickly lead to your finances becoming unmanageable. A good rule to remember is that if you cannot afford it without taking out credit, and it is something you do not seriously need, then you should not take out a payday loan.

What’s the SafetyNet Credit alternative to payday loans?

At SafetyNet Credit we have developed the UK’s most innovative alternative to the online payday loans sector. We offer a revolving credit facility, which works in the following way. First, if your online application is approved, we will provide you with a credit limit of up to £500 (based on what you can afford).

This credit limit can then be used in two ways. The first is as a smart safety net protecting you from the problems which can be caused by unplanned borrowing fees. If your application is successful, you will be able to access a personal online dashboard where you can switch on the ‘automatic SafetyNet’ option. This feature allows you to set a unique ‘trigger point’. If your bank balance reaches this trigger, a certain portion of your credit limit can then be automatically transferred into your account, topping it up so you stay in the black. Previously you might have required a payday loan simply to cover expensive bank charges incurred by accidentally going into an unauthorised overdraft. Now, with SafetyNet Credit, we can help to prevent those bank charges in advance. We charge a 0.8% interest rate that is capped at 40 days, which is lower than any bank charges for going exceeding your overdraft limit.

The second way you can use your credit limit is through the ‘Borrow Now’ option. This allows you to transfer any amount up to your credit limit into your account, any time you need it to help with essential, unexpected costs. With these two features you can precisely tailor how your credit limit is used to best suit your needs, and without having to take out a payday loan.

Ready to get started with SafetyNet Credit?