It’s simple to see why a short term loan would be so tempting. Picture this; you are £50 short on a crucial bill, and the next payday is a week away. You have maxed out your credit card and borrowing from your family and friends is not an option you are willing to explore. How do you salvage the situation?
The solution isn’t straightforward since there’s a possibility you’ll get swamped with loads of options. But in this piece, we explore taking a £50 short term loan. In this guide, we share everything you need to know about the loan and the precautions you can take.
Table of Contents
Best £50 Loan Direct Lenders 2020
What is a £50 loan?
In an emergency, a loan from a bank will not cut it. This is because the application, review, and approval process takes months (weeks at best). But this is where a £50 loan shines.
A £50 loan is a short term loan, meaning you need to repay it in a short period, usually two-four weeks depending on the lender. Below is how the loan works.
How a £50 loan works
£50 is not a lot of money, but it makes a huge difference when you are in a financial crisis. The first step to getting a £50 loan is to look for the best lender in the UK. Over the past couple of years, the demand for short term loans has increased. Consequently, lenders have increased as well. Unfortunately, not all practice what they preach. Some have offers that are too good to be true, and others care less for customer experience. It’s therefore important to take time and find the perfect lender for your needs.
Once you find a lender, the next step is applying. You can fill the form online or at a store location. Many top lenders in the UK have a couple of store locations. Though the locations are few and open for a few hours in a day, they help build a good reputation. If you are lucky, you can get a better £50 deal.
After loan submission is loan review and then approval or rejection. The £50 loan review process includes a soft check. The lender determines your loan affordability. If you pass, they approve the loan and send the funds on the same day.
Despite the checks and requirements, getting a £50 loan is easy. But, the convenience comes with a price tag. The £50 loan costs more than a bank loan. With the high costs, many borrowers get trapped in a vicious debt cycle. Loan costs are presented as interests and APRs.
When is the £50 loan due?
So, the loan has been approved, and you’ve settled your emergency. Now it’s time to repay the loan. Generally, short term loans have loan terms ranging from two weeks to 18 months. But given that it is a £50 loan, most lenders will give you between two and four weeks to complete the payment. It doesn’t make sense to have a long repayment period for such a small loan amount.
During the application process, you’ll sign a loan contract. The contract will summarize the loan details, including the due date. If you miss the deadline, you will pay a lateness fee. If you anticipate missing the deadline for whatever reason, it’s wise to contact the lender and work out a new plan and rollover the payment. Doing so will save you the lateness fee, but you’ll pay a cheaper rollover fee.
On the flip side, if you can repay the loan before the deadline, that’s great. If the £50 loan has a variable interest rate, you will save on the loan costs. But if it’s a fixed interest rate, the cost doesn’t budge. In the case of variable interest rates, read the fine print to be sure the lender doesn’t charge an early repayment fee.
The early repayment fee is instituted to help the lender mitigate the ‘lost’ income. Since interest is charged daily, it means they do not earn loan interest on the remaining loan days.
The cost of a £50 loan
It’s no secret that a £50 loan from a lender will cost more than from a traditional bank. But before we get into the costs, there’s a difference between the interest rate and the APR.
The interest rate is the annual cost of the loan and is usually expressed in a percentage. APR is also the annual loan cost for the borrower but includes fees. It is also expressed as a percentage. So essentially, the APR gives a better picture of the cost of the loan.
But what’s the need of having two numbers? Well, the interest rate considers current loan rates and your credit score. Therefore, if your credit score is high, the interest rate will be lower. Also, monthly repayments are based on the principal amount and the interest rate and not the lender’s APR. On the flip side, the APR is a figure set by the £50 loan lender since it consists of lender fees and other fees.
The cost of a £50 quick loan varies from one lender to another. However, due to FCA limitations, it can only cost as high as £12 a month (24%). But if you factor in additional fees like lateness fees the costs could be higher.
Speaking of lateness fees, the FCA also has a preset limit of £15 for all loans. The regulations exist to ensure you don’t repay more than double the principal amount.
There are two main ways to repay a £50 loan;
- Postdated check
- CPA (continuous payment authority)
It is a check with a future date. But despite the future date, the check could be paid before the said date. Luckily, most top lenders adhere to the due dates according to the loan contract. This is common with store location loan applications.
A CPA is permission granted to a lender to withdraw payments from the borrower’s bank account. This repayment method is common with recurrent payments. It is convenient and reduces the chances of missing the deadline.
However, there are some borrowers with some concerns. Many are scared the lender will get access to their personal information or, worse still, empty their bank account. This cannot happen because the authorization is for a specified amount and a specific period. You can also cancel the CPA at any time through your bank or the lender. And if the lender tries withdrawing payments after cancellation, the transaction becomes unauthorized, and you could take legal action.
In the past, lenders took advantage of CPA and repeatedly attempted to withdraw payments from your account. This used to happen when a borrower doesn’t have sufficient funds. The point was to reclaim as much money as they could. This meant that the repayment got priority over rent and other bills.
Luckily, the FCA intervened and set the maximum attempts to two, after which they should contact you for the repayment. With the new law, lenders have to be thorough with their affordability checks.
Consequences of defaulting the £50 loan
One might think a £50 loan is too little to default on. While it might seem so on paper, several factors come into play, including delayed payments. Luckily, before the lender declares you a defaulter, several steps must have happened.
Once the CPA or the postdated check doesn’t clear, the next step is to contact you. If the lender cannot reach you, they will contact your family and friends. And if this leads to a dead end, they will hand over your name to debt collectors. At this point, you are a defaulter.
Before things get out of hand, contact the lender, and explain your situation. They might opt to rollover the loan and come up with an alternative repayment plan.
How to apply for a quick £50 loan
You can apply for the loan online through your PC, mobile phone, or tablet. Alternatively, you can visit the closest lender store location. Regardless of your choice, the process will be the same;
- Review eligibility
- Loan application
- Loan approval
- Sign the loan contract
- Receive the £50 loan
Lenders make the process simple for all. Whether it’s an app or a website, the application process is guided and takes less than five minutes.
£50 Loan Requirement
Most lenders accept individuals with poor credit scores. However, this doesn’t infer that they will accept anyone. Even with a poor credit score, they will first ascertain if you meet the loan requirements and if you can afford it.
The eligibility criteria include;
- Be 18+ years old
- Have a UK bank account
- A regular source of income
- Be a UK citizen
The documentation you will provide include;
- You identity card
- A bank statement
- Proof of residence for the past three years
Types of £50 Loans
A £50 payday loan
As the name suggests, this is a short term loan that you will repay on your next payday. The repayment could be in full or in instalments. These loans are convenient but also costly since they take on high financial risk borrowers in comparison to traditional banks. The longer you take to repay the loan, the more it will cost.
£50 Doorstep Loan
This is a regular short term loan. But instead of the £50 being deposited into your bank account, the lender sends a representative and delivers it to your doorstep.
£50 instant loan approval
Instant £50 loans are available with lenders who have automated review and approval systems. But even then, the loan takes a couple of minutes before it reflects into your account.
But in comparison to traditional bank loans, which take months or weeks to fall through, they are ‘instant.’
£50 bad credit loans
Bad credit loans are from lenders who accept borrowers with poor credit scores. Generally, such lenders are high financial risks, and banks cannot afford to extend loans. As a reward for the risk, lenders charge high costs.
£50 bank overdraft
A bank overdraft is when your bank allows you to withdraw £50 more than what you have in your account. The extra £50 attracts a cost. There are two types of bank overdrafts: authorized and unauthorized overdrafts. With an authorized overdraft, there is an agreement in writing. Without the agreement, it is an unauthorized overdraft.
£50 revolving credit
This is more like an authorized bank overdraft. It has a limit and attracts interest, albeit lower than that of an overdraft. They are flexible and almost always open-ended.
Unlike a line of credit, revolving credit isn’t a one-time agreement.
£50 no credit check loan
Traditional banks and some lenders check your credit score. They use this to determine your eligibility and the interest rate they’ll charge. However, some lenders dont conduct credit checks. Instead, they focus on affordability. These loans are flexible and available to borrowers with poor credit.
Tips for choosing the best £50 lender
Before settling on a £50 loan lender, you need to determine if they are right for you. Below are some factors to consider.
- The APR – this is the cost of the loan. It includes all hidden fees.
- Customer reviews – it’s essential that past borrowers have positive reviews of the lender.
- Loan term – since it is a short term loan, the longest term you expect is a month
- Eligibility – the lender shouldn’t be too strict on requirements
- Fees – the hidden fees shouldn’t be too many or too expensive.
- The loan amount – the lender shouldn’t passively force you to get a higher loan just to get your £50. Taking a higher loan leads to more costs
Should I take a £50 loan?
The decision to take the loan depends on you. Below are some questions to guide you in knowing if it is a feasible idea.
- Are there cheaper options? If you qualify for a cheaper option, consider it.
- What do you need the £50 for? Is it a cost you can postpone? Can you delay gratification until your next paycheck? Or is it an emergency?
- Can you manage the repayment? Short term loans are expensive. Can you afford a repayment with your next paycheck without getting stuck in a debt cycle?
Advantages and Disadvantages of £50 Loans
- No limit on how you can spend the money
- Fast approvals
- Accepts borrowers with poor credit scores
- No collateral
- The loan is costly
- Potential to get stuck in a debt cycle
- Some lenders are cons
Though a £50 loan may seem like a small amount, it can save the day when you are in a financial crisis. When no other financial institution helps you, short term lenders are your best option. However, before you sign a contract, read the fine print, and understand the implications in case you are late on payments or default.
If you have all your basis covered, you are good to go.
Will the lender check my credit score?
It depends on the lender you choose. Some do, and some don’t. Those that don’t focus on your loan affordability. And those that do use the information to determine the interest rate to charge. Otherwise, most short term lenders approve £50 bad credit loans.
Do I need my bank account to apply?
Generally, yes, you do. Most lenders require a UK bank account to deposit funds and withdraw their payments on due dates. However, some lenders don’t need your bank account and use alternative payment methods instead.
Can I borrow more than £50?
Yes, you can. However, if your financial emergency requires £50, we advise not taking a bigger loan. Sure, you’ll have more money to work with, but you will also pay a higher cost. And chances of misusing the surplus amount is high.
What can I use the £50 for?
There is no limit on how you can use the loan. The lender is only interested in you repaying the loan. Whether you use it to cover medical expenses, pay some bills or repair your car, it is up to you.
How should I repay the loan?
It depends on the lender. If you applied from a store, you would provide a postdated check. If you applied online, you’d provide bank account details and, in the process, offer CPA. The lender will deduct payments directly from your account. Some lenders will allow you to pay using your credit card, money order, debit card, and cashier’s check