Payday loans can often be misunderstood and people may not know when the best time to use them is. Therefore, it can be a good idea to understand a bit more about them and then you will know whether they will be the right choice for you if you need to borrow money.
Who are the loans for?
Payday loans came about because it was noticed that there was no way that those with a poor credit record could easily borrow money. Therefore, new lenders came onto the market that were happy to take the risk and lend to these people. They also realised that it was very likely that they would need the money urgently and therefore they made sure that the loans would be available quickly.
You could therefore conclude that because loans were designed for those people that needed money quickly but had a poor credit rating then these were the only ones that should be looking at these loans when needing to borrow money. However, there are no rules by the lenders to say that you have to fit into this category to be able to borrow from them. They will not check. Therefore, if you cannot borrow from elsewhere, you can use them even if you have a good credit record or do not need money quickly or if you need money fast they could be a quicker option for you.
When should they be used?
We should always be cautious when taking out a loan and think carefully before doing so. This is because loans cost money and we will need to think about whether we think that it is worth paying that money out. Therefore, always work out how much the loan will cost you and that will allow you to be able to decide whether you feel that it is worth paying this. Also, by doing this you will be able to compare that cost with that of other lenders so that you can make sure that you are not paying more than necessary. It is also worth thinking about the following things:
- Do I really need the money? – it is wise to really think about whether the loan is completely necessary. You should always do this when getting a loan because of the cost of it. Consider whether you can wait until you next get paid or whether you even need the item you are buying. If you need it for a bill, try contacting the company and see if they can wait for payment, for example. Make sure that you really do need the money.
- Are there alternative ways to borrow? – it is good to also compare all of your borrowing options. You need to check what is available to you and what will suit your needs the best. Knowing about all the different loan types and what each can offer you is an important part of this. You will be able to look at all of the types of loans and find out information about them to decide which might be the best. It is also worth looking at alternatives to borrowing. For example, you might have savings that you could use, be able to get an advance on your salary or sell something to get the money. It is good to be open minded about all of the options that you have as this will enable you to come up with the best solution for you, depending on your personal circumstances.
- Can I repay it? – one of the most important questions you should be asking yourself is can you repay the loan. This is something that it is really easy to forget about but it is so important. Many of us will think about the money and what we will spend it on and forget about how we are going to repay it. So, start by finding out exactly how much you will be expected to repay and when you need to make the repayment. Then you will be able to look at your finances to see whether that is something that you will be able to afford. Take a look at what you normally have coming in money wise and what you normally buy and then you will be able to calculate how much you will be able to afford normally. It might be that you will be able to reduce spending in some areas to make it easier for you to be able to afford the repayment. You might be able to find some ways to make extra or earn extra money as well which could help you. It is well worth coming up with a plan so that you are able to be confident that you can manage to repay the loan.