You may have friends that use payday loans and you may therefore wonder whether they will be a good thing for you to try as well. It is wise to have a good understanding about the loans and what they are designed to be used for before you figure out whether they are suitable for you.
What are payday loans for?
Payday loans were set up to help those with a poor credit record. These lenders noticed that there were no borrowing options for those that had a poor credit record and therefore if they needed money in an emergency they would have nowhere to borrow from. This means that they decided to set up loans that were specifically targeted to meet this demand. So the credit checks done on them are minimal and as long as the potential borrower has a regular income they are likely to be accepted for the loan. The loans are also really quick to set up. Some lenders can get the money into your bank within a few hours of a successful application and some work outside of normal business hours so that they can send you money at any time. If you do need money quickly then it is worth checking with the lender you are hoping to use to see how long it will take them to get it to you.
How do they work?
A payday loan has a unique repayment scheme as well. Unlike most other loans. You repay it all in one go in a lump sum repayment. This means that you will be able to eliminate the debt very quickly. The loan is designed to keep you going until you next get paid and this means that a direct debit will be set up for you to make a full repayment on the day that you are paid. You will therefore need to make sure that you are confident that you will have enough money available to make that repayment when it is needed. It should be the case that you will have lots of money in your account when you get paid, but whether this is enough will depend on how much you have borrowed and how many other payments go out that day as well as how much you get paid.
Should I get one?
Getting any loan should be a decision that you do not take lightly. You should take time to think about the decision and whether it is one that will work for you. If your friends use payday loans, then this is probably something that will make you think that they are trustworthy and that if you need one then you should have one. You could even ask them which lender they use and whether they would recommend that specific lender. However, it is a good idea to also think about whether the loan will suit your specific needs. Identify what you are looking for in a loan and if this will work. Also check your financial situation and make sure that you will be able to afford to repay it. If you cannot afford the repayment then the loan will cost you more money and this is not ideal. It is really important to also think about whether you will be able to afford the rest of your essential payments once you have repaid the loan. You will have to manage for the rest of the month on your salary minus that lump sum payment. You will need to cover the costs of all of your essentials such as rent or mortgage, utilities, food, transport and things like that. Therefore, it is worth calculating whether you will have enough money to do this. If not, you may need to consider borrowing less, seeing if you can repay in instalments or finding a way to get some extra money really quickly such as doing some freelance work or online work.
It is a big decision to make and you should not let your friends influence you too much. You need to think about what will be best for you. Therefore, think hard about that repayment and whether you feel that you will be able to cope with it. It can also be worth comparing different lenders as they will have different costs. If you work out what the loan will cost you for various lenders you may find that there quite big differences in cost and that if you pick the cheapest one, you might be able to afford to repay that one. It will take time to do this research and to think about your situation. However, it will be worth it because it will make a big difference as to whether you will have a positive borrowing experience or not.