A payday loan is a short term loan for a relatively small amount of money. They have to be paid back when you next have a pay day and you usually have to pay them back all in one go. They are expensive compared to other types of lending and many people think that they should be better regulated or banned totally. However, there are many people that use them and some feel that they have been really useful for them. So when should anyone consider having one?
Like all loans it is wise to consider whether you need to borrow any money at all. They all cost money and so you will be better off using savings or saving up for what you want if you can. It is wise to calculate the cost of the loan and think about whether you think that it is worth it. Loans should only be used in an emergency after all and so if you can manage without getting a loan, then it is wise to do so. If you need the money for a bill, for example, you could call the company and ask whether you could delay payment for a while until you next get paid. You may be able to borrow the money from friends and family which could save you the cost of a loan.
If you have decided that you cannot cope without a loan, then it is worth investigating all of your options. You need to think about the cost and whether there are cheaper options available to you as a payday loan can be expensive. If you have a credit card, for example you could use this and if you pay it back quickly enough you will not have to pay any interest on it. You could possibly use an overdraft, although an unauthorised overdraft can be more expensive than a payday loan, so be careful with this option.
The next thing to consider is how you will repay the payday loan. Payday loans are pretty expensive but if you do not pay it back on time, you will find that the costs will increase sharply. This could make it even more difficult to be able to pay back and the charges will keep piling up. Therefore it is really important that you are sure that you will be able to pay it back on time. You may think that setting up a direct debit for the repayment amount will be enough, but you also need to make sure that there will be enough money in the account to cover that repayment. Make sure that there are not too many other payments going out on that day which could drain the account and that there will be the right amount of money available to pay it back.
So it is best to avoid a payday loan if you can. All loans are expensive and these are some of the dearest. Therefore if you do need a loan then see whether there are any other options that you can use. If you do go ahead with the loan then make sure that you are really confident that you will have enough money to be able to pay it off. If you do not then it could end up being really unmanageable and expensive.
It is also worth thinking about whether this financial difficulty is just a temporary blip or whether it is something that is becoming long term. If it is then it is worth looking at your lifestyle and whether you can make some significant changes to improve your situation. It may be that you can cut your spending in some areas or that you can increase your earnings. It is worth looking at every area of spending to see whether you can cut down anywhere. Sometimes you can swap utility providers, brands, insurance companies or things like that and make some significant savings. It may be that you are spending too much on luxury items and need to cut down there. Earning more money can mean that you will not have to go without buying things. If you have a job then you may be able to work more hours or ask for a pay rise. Perhaps it is worth looking for a better paid job or getting a second job.