There are lots of different types of loans available to UK residents and a lot of people aren’t completely aware of the differences. Peer-to-peer lending and payday loans, for example, are two different types of loans that a lot of people tend to be confused about. Not to worry, though. We’re here to help you learn the differences:
What Is A Payday Loan?
To start, a payday loan is a small loan that you take out from a direct lender. These types of loans are intended to be short term and are often used for emergencies, so you would normally pay back the loan within a few months to minimise the amount of interest you accumulate on your loan.
What Is Peer To Peer Lending?
Peer-to-peer (P2P) lending, however, is something completely different. P2P lending is a service that puts independent borrowers and lenders in touch. So, rather than borrowing from a company, you’re borrowing from an independent person and they will be the ones to decide the interest on the loan and how soon they want it paid back. This can be extremely daunting to some people, as they do not have a brand or company name for them to feel secure about.
Why Do People Choose P2P Lending?
P2P lending gained popularity some years ago for a number of reasons. One of the reasons why a lot of people turned to P2P due to the high interest rates that many payday loans had before FCA regulations were implemented in 2015. Now, with Wizzcash you can pay back your loan in instalments at a fixed interest rate of 0.8% per day – all of which you can see with our online loan calculator when you apply.
P2P lenders screen their lenders and borrowers via credit checks, to make sure that they will pay back, and some people find comfort in this. This can be a benefit as well as a disadvantage for a lot of people who want to borrow through peer to peer lending. If you’ve ever defaulted on a payment in the past or filed for bankruptcy, you’re more than likely going to be refused a loan from P2P lenders, and they are equally going to be less versatile when it comes to paying the money back. But, this also applies to people that don’t have much of a credit history at all. If you’re quite young and don’t have much experience when it comes to paying bills then you might be rejected on the grounds that you’re a risk of failing to repay.
Benefits Of Payday Loans
On the other hand, payday loans aren’t regulated in the same way, but that doesn’t mean that they are any less safe. While many payday lenders check the credit score of their potential borrowers the requirements tend to be a lot less strict. This is because payday loans are meant for short-term financial emergencies, but companies also understand that not everyone is going to have a perfect credit history. Wizzcash screens applicants with a number of affordability checks which include a credit check and tests their eligibility by having them fill out an online form, all while following FCA guidelines. If you earn at least £750, are a UK resident, and are 18 years of age or older, you are eligible to apply for a payday loan with Wizzcash.
So, if you haven’t been approved for a P2P loan or you’re looking for a regulated and responsible lender to help you with a financial emergency, you could consider taking out a short term loan with Wizzcash.
Generic advice is not a service regulated by the Financial Conduct Authority.