Many of us have heard of a payday loan and we may have also seen stories in the press about how people have had trouble with them. This can be very off putting and you may have vowed that you will never take one out. However, it is possible to get into trouble with any type of borrowing that you decide to use and there can be a place for payday loans in some situations.
When to Borrow
Borrowing money is always going to be expensive. There will always be interest to pay and fees and therefore you should always think very hard before you borrow any money. You need to consider whether the money that you will be paying out for the loan will be worth it. Obviously we pay money for things all of the time and make these judgements, but we need to make sure that we are aware of the full costs of the loan when we decide and then we can think whether it will be worth it or not.
It is also good to think about the repayment of the loan. Consider how you will go about repaying it. Think about whether it will be something that you are likely to find easy or struggle to do. If you think that it will be difficult to pay back then before you take out the loan, come up with some plans on how you will afford it. Consider whether you can get more income from anywhere to help out or whether you can reduce your spending in other areas so that you can manage more easily. You will find that different loans have different repayment plans and so it is important to choose one that will suit you too.
Choosing the Type of Loan
There are many types of short term loans available and it is wise to choose the one that is most suited to your situation. A payday loan tends to be available for those people that do not have a good credit record. This is because they do not do a credit check, unlike other lenders who will not lend to those with a poor record. As these loans as for those with a poor credit record it means that the lenders is taking on a big risk by lending and this means that they will charge more money as a result. Their interest rates are therefore high compared with some other types of lending. However, the debt will be short term and therefore will not be hanging around for very long. It will be for a small amount of money, which means that you will not borrow more than you need and therefore will not be in debt longer than necessary and for more than necessary. If you repay on times, the rates are not massively high, but if you miss the repayment date then you will be charged fees, which could add up and be expensive which is why it is important to have a repayment plan in mind.
A payday loan can be arranged very quickly. If you apply early in the morning, it can be possible for you to have the money that you need the same day or the next day . This is significantly quicker than other forms of borrowing. This means that if you need money really quickly, they can be a good option for you. Most forms of borrowing will take a long time to arrange and by then it may be too late. If you need to pay a bill to stop you being cut off, need to pay for food or need to replace a broken fridge, you may not be able to wait for a week or so to get the money. Only if you have a loan already arranged, as with a credit card or overdraft, would there be a quicker option than a payday loan.
So a payday loan is suitable for someone that needs money quickly in an emergency. It is necessary to know how you will repay it though and to be aware of the costs. It can be arranged very quickly, which means that it is great for borrowing in an emergency. A credit check is not done either, which means that you can use it even if you have a poor credit record.