The "Credit Crunch" or "Economic Downturn" whatever you like to call it has affected us all in one way or another.

The ability to borrow money was seen as one of the reasons that the economic downturn occurred in the first place. Simply put, there were many people borrowing money beyond their means and many lenders and/or banks that were willing to lend to them.

Loan lenders and banks have made the borrowing of money a lot more difficult. There are of course reasons behind this as people should only be allowed to borrow money if the lender is happy that the person borrowing will be able to afford to pay it and the interest back.

In the US a new type of unsecured loan appeared and has since made its way to the UK, Canada and Australia. Payday Loans offer customers an easier way of borrowing money compared to the traditional routes of borrowing through unsecured loans.

With a payday loan you are limited to how much you can borrow. In the UK the maximum is £1,000 with the minimum being £80.

As the name suggests payday loans are loans to be borrowed until you next get paid. So you clearly need to be employed or self-employed to get one. The criteria in getting a payday loan is quite relaxed although payday loan lenders will only lend someone the money if they feel they will be able to pay the loan back comfortably.

Applying for a payday loan is generally done online although some firms will allow you to telephone them to apply. Online internet applications are the most popular – generally an application will take between 1 to 2 minutes to complete and some firms will give you an instant online decision. You may get a call from a payday loan lender once you have completed your details online – this will simply be to confirm some of the information you have entered and to advise you how much you have been approved.

When you first apply for a payday loan and get accepted you may be approved less than you originally applied for. This is quite normal for first time customers. If you pay the payday loan back on time and need to apply again in the future there is a good chance that you will be approved a higher amount.

The APR on a payday loan is quite high but this is only because you are borrowing the money back over a short-term – maybe only a few days until you next get paid. Generally interest is calculated at around £20- £5 per £100 borrowed. So, £300 loan could cost you £360 to £375 with interest. These figures do vary from lender to lender so it is important you find out this information before you take the loan.

As added advantage of payday loans is that some lenders may not need to credit search you – again each lender varies. If you have a bad credit rating this could mean that you still stand a good chance of being approved a payday loan.