Student Payday Loans Compared
If you only need to borrow money for a short period of time to get you to your next student loan payment or to cover short term expenses as a student, read on!
Student Payday Loans Summary:
Here are the facts on what you should know:
- No late fees and grade periods with some loans
- Mainly online applications.
- Must be over 18 years old.
- Can be same day cash into your bank.
- Average APR 390%
Read the full guide below, or skip to the best rates.
Student payday loans – how do they work exactly?
Payday loans for students are like regular payday loans, but are designed with students in mind. Students are often on very tight incomes, often student loans of funded by family members, and often have little or no income from employment. In the past, this would have prevented the student from being able to get a loan, but lenders are increasingly seeing younger people, especially those enrolled in school, as a reasonable market for low to medium risk loans.
Like all payday loans, these are toward the more expensive end of the loan scale, often charging higher interest rates and fees. If you are waiting on your next payday though, and need some cash right away, this is a reasonable means of getting your hands on some cash, when you need it.
Do I need a full time job to get a student payday loan?
No. Lenders recognise that responsible students often have irregular hours, part-time work, and are experiencing the responsibilities of living away from home for the first time.
Lenders will still need to do credit checks, and to ensure that you are reasonably able to repay any loans offered to you. For that reason, loan amounts will be fairly modest. However, if what you need is a little cash to get you through to your next payday, this type of loan may be a great solution.
What are the problems with student payday loans?
Students are usually younger people, starting out on their own for the first time. Many of these do not have a lot of experience with or understanding of finance. Student payday loans may be a great solution to short-term money problems, but if not understood for what they are, they may also plunge a student into debt, credit damage, and a long-term problem.
Are Student Payday Loans Expensive?
Payday loans are expensive. It costs a lot in fees and interest, so buying something with £100 from a payday loan, may wind up actually costing £120, £200, or even £1000 or more, if not handled correctly. Many student payday loans charge interest rates well above 1000% APR, capped at 0.8% per day. This means a £100 loan may cost £0.80 per day (about £24 per month). A £1000 loan would cost £8 per day.
This cost is on top of fees, and before any penalties for paying late, if that should happen. The FCA has placed a cap of £15 per missed payment, but even with this safety net, a student pay day loan could cost you more per month than a similar credit card debt would cost you in a full year – and credit cards are not the cheapest form of debt either!
Once a person is in this situation, there is very little room for negotiation, too. The lender can, according to the loan agreement usually signed, take money from your account without further consent from you, and they don’t need to notify you beforehand or afterward. This is called a Continuous Payment Authority (CPA) agreement. Most lenders won’t even tell you this is the case, so be sure to read the fine print and ask specifically – you may even want to get it in writing if they claim that there is no such agreement.
What if I miss a student emergency loan payment?
Most people know that missing payments or defaulting on loans can hurt your credit score, but what many people don’t realise is that taking out a pay day loan – even if you repay it all according to the contract and with no problems – is seen as a mark against you on your credit history. Because these loans are so expensive, and are aimed at people in an unsteady financial situation, taking out a loan like this is seen as a sign of financial irresponsibility, and may mean that high street lenders and even credit unions might not offer you credit later on. Student pay day loan lenders are most often seen as predatory lenders, which means they seek out the financially vulnerable and take advantage of them.
Know this before going in – not many situations make paying that kind of cost worthwhile.
What are the alternatives to a student payday loan?
So if this is the case, what are your alternatives if you find yourself in trouble?
A great option is the Access to Learning Fund. This is provided by many universities to help students through times of financial hardship. Each case is assessed individually, so show them you can handle money well, but have a temporary problem, and they may be able to help.
A student bank account comes with a 0% overdraft of up to £3,000. This is a great overdraft plan, and can carry you for some time if handled well.
A 0% credit card may also be an option. Interest will be fairly high after the 0% period is over, but if your financial need is temporary, this could work.
A credit union can also help. These are like banks, but are not for profit, and are therefore more interested in helping the community. As part of the community, they may be able to help you.
A bank loan is also better than most other forms of credit. Rates will be reasonable, and if you have someone willing to sign on to guarantee the loan, they may be even better.
Family and friends might also be able to help, and the best part of this arrangement is that there is often little or no interest to pay at all. It can come with some strings, and can be uncomfortable, but sometimes it is the best solution available.
There are a lot of charities, and guidance counsellors available to help you figure out a cash shortage problem. You don’t have to feel alone or without any good options. Talk to someone, they may be able to point you to a great option.
Is this the same as an emergency student loan?
Pretty much exactly the same, yes. It is for a situation when you have a dire need for short term financing help, can afford to pay it back (eg/ your student loan is due) and are happy to pay back significantly higher interest rates than you would be if you could wait for your actual student loan to arrive.
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