You may have heard a lot of negative things about payday loans and this may make you think that you should not take one out. Alternatively, you may feel that they are only for those who need money quickly or that have a poor credit record. However, these are not good reasons for dismissing a loan type. If you need money then it is worth considering all loan types and comparing them so that you can find the one that is the best for you. This means that you should consider each one carefully using the same criteria. There will be some questions that you should ask yourself.
- How much do I need to borrow? It is important to make sure that you borrow the right amount of money. Obviously, you will need to make sure that you enough for the purpose that you need the money for, but you also do not want too much. It can often be tempting to borrow more than you need because you will have a bit extra to treat yourself. However, you need to remember that you will pay interest on every bit of money that you borrow and so you want to borrow the minimum amount that you need. So, make sure that you are aware of exactly how much you need and borrow as close to that amount as possible.
- How long do I want a loan for? It is worth asking yourself whether you are prepared to repay a loan over a long time period or whether you would rather have it for very little time. Some people would rather get a loan repaid as quickly as possible so they can relax and not worry about it. Others do not worry about it anyway and are happy to repay the loan over a longer time period so that it is easier to manage. It is worth making sure that you are aware of the costs of delaying the repayment. You need to consider that the longer you have a loan for, the more expensive it is likely to be as you will be paying interest every day that you hold the loan. So even if the interest rate is small and you do not borrow more than necessary, it will still be costing you money.
- How much can I afford to repay? It is really important to think about how much you can afford to repay. Look at your bank statements and think about your situation and whether you could even cope with making small repayments. It is worth checking back for about six months if you can as looking back at just one or two will not necessarily give a typical picture. It will depend on whether you had any extra expenses such as birthdays to buy for, bill that only come annually and things like that. You need to consider what you might do if you cannot afford the payments. It might be best just to forget the idea of borrowing money, but if you really need it then you will need to come up with a plan to help you manage the repayments. It might be that you will need to reduce your spending on other things by buying cheaper versions of what you already buy or cutting back in some areas. If you already do this then you may need to look into working more hours.
Once you have decided how much you need to borrow, how quickly you wish to repay it and how much you can afford to repay, you can then start to think about which type of loan will suit your needs the best. A payday loan normally has to be repaid in a lump sum with a few weeks of being taken out. This is ideal for someone who does not want a loan to be hanging around for very long. You can normally only borrow up to £1000 which means that is really most suitable for someone that only needs to borrow a relatively small amount. As you do have to repay it all in one go, you need to be sure that that will be something that you will be able to afford. You need to think about how much it will be and whether you will have the money to pay it. Also consider the other things that you have to pay for as well and whether you will be able to afford those as well. If not, then you could find yourself needing to borrow money again and this will be expensive and could lead to a cycle of debt. Therefore, it is important to plan carefully and make sure that you are confident that you will be able to manage the repayment. If you will have to cut back to afford it then make sure you know exactly where you will be cutting back so that you can make sure that you do so.