Can You Change the Amount You Borrow After Taking Out a Payday Loan?

December 24, 2011 by  Filed under: Loans 

Payday loans are renowned for their flexibility. Whilst long-term borrowing is weighed down by major restrictions, delays and red tape, their short-term counterparts are quick, easy and accessible for most. But does this extend to adjusting the amount that you borrow once your application has been accepted?

The answer, as with most issues in the financial market, is entirely dependent on the company that you use. However, there are an increasing number who now offer a completely flexible lending option; allowing applicants to secure a cash loan, which can then be topped up to a maximum level.

Where would this be needed?

The idea of a payday loan is to provide consumers with the opportunity to access money quickly and safely. They aren’t a direct replacement for long-term personal loans, but do provide an alternative. As most will be aware, there are certain interest charges that are applied which can make the cost of borrowing relatively high (usually a maximum of around £25 for every £100 borrowed). As a direct consequence, it is only advised that you borrow to cover short-term issues and always take care to apply for cash that you can afford.

Therefore, with this in mind, it might seem a little unnecessary to provide top-ups on payday loans. However, just because you’ve already had one financial mishap in a month, it doesn’t immediately mean that you are exempt from any further issues. Perhaps you didn’t borrow enough in the first place or your car decides to break down. Whatever the situation, it’s important that you can cover any essential costs, which is where an extension on your payday loan could be vital.

What costs are involved?

Increasing the amount of your loan won’t be free. As well as additional interest, which is applied to the total amount borrowed, you may also be asked to pay a small charge to cover the administrative work involved or for a secondary bank transfer. If your original loan was with a company that charges a flat rate of interest each month, then this same rate will also be applied to any further money that you receive.

However, there are other lenders that only offer payday loans with daily interest charges. This can prove to be quite beneficial in any instance where you need a top up, as you will only need to pay interest on the amount borrowed for a finite period. You will have to watch out for other charges though in any such instance as these can push up the cost of borrowing significantly.

Paying back the loan early

Whilst the majority of this article has focussed on the costs of increasing your loan during a month, it is also worth exploring the benefits of repaying it a little earlier than scheduled. Again, with those companies that charge a standard rate of interest on loans – often somewhere between 15 and 30% – the impact of any such repayment is likely to be limited; as such the benefits are likely to be equally marginal.

However, should you pay interest daily – often around the 1% mark – it could prove to be beneficial to shave a few pounds off of your total debt and eradicate some of the cost of borrowing. Even if you can’t afford to pay it off in full, if you do come by a little extra money during the course of the month, you should certainly consider looking at paying off a small chunk of your loan.

The flexibility of payday loans can therefore be a huge asset, particularly if you need to access more funds after your initial application. Whilst you have to be wary about borrowing more than you can afford to repay, it can be of great comfort knowing that you aren’t restricted by your initial application.

Vincent Rogers is a freelance writer who writes for a number of finance businesses. For Payday Loans, he recommends Payday Power.

Article Source:
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