Will Payday Loans get me out of Debt?
If you are stuck with a debt and want to get rid of it then you might be toying with the idea of using a loan to clear your other debts. There are different ways to do this and it might be that you are considering that a payday loan will be the answer to doing this. It is worth contemplating this idea but making sure that it will work.
Can I borrow enough?
The first thing to ask yourself is whether you will be able to borrow enough money to repay your debt. This will obviously depend on how much you need to repay your debt. It is worth knowing how much you can borrow with a payday loan and this will help you to decide whether you will be able to borrow enough. A payday lender will tend to lend from £100-£1000 and so you will need to think about whether this could even be enough. If you have a mortgage, for example, this is very unlikely to be enough but if you want to clear an overdraft or credit card it might be enough money. It is a good idea to also make sure that a payday lender will give you enough. This could be tricky particularly if you are a first-time borrower. A payday lender will often only lend small amounts to first time borrowers. This is because they want to build up trust with their borrowers. They will lend to those with a poor credit record and so they will not want to lend them large amounts of money if they think that there is a risk that they will not pay it back. Therefore, some of the lenders will lend a small amount to start with and then if the borrower pays that back successfully, they will then lend them more. To find out whether a lender does this, it may be necessary to contact them and check with them.
Can I repay it?
The next thing to think about is whether you will be able to repay the loan. It is all very well getting a payday loan to pay off another debt, but you will then need to repay the payday loan. The fact that the payday loan is set up to take payment in full on the day that you are due to be paid can be very helpful. It will mean that you are likely to have the money available there to repay the loan. However, it is still important to make sure that you check to make sure that you have enough money to cover the full repayment, which will not just be for the amount of money that you have borrowed but for the interest and fees as well. You will also need to make sure that there will not be too many other payments going out that day so that there will not be enough left to pay it. Often, we will have direct debits and standing orders set up to go out on the day we are paid to pay our rent or mortgage, loan repayments, bills, utilities, contracts and other things so we need to make sure that there will be enough there to cover everything. You might also have other expenses through the month that you will need the money for and you will need to think about these as well. Once the lump sum of the loan is repaid you could find that you will then not be able to afford everything else. So, this is why it is so important to calculate what you can and cannot afford so that you can be sure that you will be able to repay the loan and manage to buy everything that you need.
Will I stay debt free?
It is worth thinking about whether this will help you to stay debt free or not. You should think about whether you are likely to repay the loan and then not borrow again or whether you might keep on borrowing afterwards. It might sound a little odd, but sometimes having a bit of debt will stop someone from getting more. This is because they will be worried that they have to pay off what they have before borrowing more. Once it is paid off, they might then think that they will be able to borrow again and could begin the borrowing cycle all over again.
It could also be the case that it is difficult to repay the payday loan and so that debt hangs around instead of the debt it paid off. This may just mean that you have replaced one annoying loan with another one. Therefore, you need to be sure that you will be able to repay it when you are supposed to.