Category: Loans

Should I Take out Payday Loans?

It can be a difficult decision as to whether to take out any loan. With a payday loan we can often be even more cautious. This is probably because we are less familiar with them and the way that they work. It is good to ask yourself a few specific questions and then you will be able to work out whether they are for you.

Do I really need the money?

It is good to start by asking yourself whether you really need the money or if you should not borrow the money at all. This is something we should be asking with every loan that we take out. There are loans for different purposes but a payday loan is designed to be used in an emergency. This means that we should think about what we are using the money for and whether it is an emergency. Of course, we will all have different ideas about what might be an emergency. It could be that we have run out of food and have no money to buy it with, that we have a bill that needs paying or we need the car repairing so that we can drive to work. However, it might be that we have run out of hair dye and our self-esteem is low if our roots show, that we want to buy a new book to amuse ourselves or need to pay for more minutes on our phone so we can talk to friends. These may not be seen as essentials to some but to others they will do. It is therefore a really personal decision as to whether this money is really needed or not.

Can I repay it?

This is really important and should always be considered when you are borrowing money. You will need to start by working out how much the loan is going to cost to repay. It can be easy to guess this but not easy to actually get it right! It is much better to find out for sure. You might be able to use a calculator on the website of the lender and work it out that way. Most sites should have one but if you are not sure about using it or you want to be completely sure, then you could ask the lender directly. They will be able to calculate it for you and you will be able to be completely sure of the amount.

Once you have this amount you will need to calculate if you can repay it. You will normally have to repay it on the day that you are paid (but check this as well). Therefore, you need to see how much money you will get when you are paid and this will allow you to know if you will have enough. However, you must not stop at this stage. You also need to make sure that you will be able to pay for everything else that you need as well. This includes all of your bills, rent or mortgage, loans repayments, contracts, travel to work, food and things like this. We all have a lot of things that we need to pay for and you will need to be sure that you will be able to afford those things as well. 

Do I have other options?

It is a good idea to compare this loan with other options that you might have and it will allow you to decide whether it is the best idea or not. You might think that it is your only option but it is very likely that it is not. Firstly, you may have some savings that you might be able to use instead. Most people find it difficult to use savings because they are either saving up for something specific or they have spent a lot of time saving up and want the money for an emergency. It is understandable that this is difficult but one way to help you part with the money is to calculate the cost of the loan. This should motivate you to use the savings because of the fact that you will be saving money.

Of course, not everyone has savings that they can use and therefore may need to look at other options. You may be limited to other borrowing options. It is worth knowing that there are different types of short-term loan and so if you have picked a payday loan because you have a poor credit record, you might be well advised to look at other short term loans. They all work a little differently and it is a good idea to think about what you need in a loan and which will work better for you.

You may also need to think about whether more traditional loans might work. If you are looking at a payday loan because it is quick to organise, for example, then you may find that an overdraft will also do the job. However, these can be more expensive so you will need to check that too. A credit card might also be an alternative if you have one already. It will take time to arrange a new one and there is no guarantee you will even get approval, but if you already have one then it will be a quick way of getting money. This can be expensive too though if it is not repaid quickly. There is no pressure to repay more than a minimum amount and so it can mean that the debt lasts for a long time and this can mean that the interest payments add up to a really high amount.