Being surprised by a large, unexpected expense can be stressful for anyone, but especially so if you are already on a tight budget. If this is the case, you might be tempted to take out a payday loan in order to help to keep you afloat until the next payday. However, there are certain factors to consider before applying for a payday loan. This guide will take a look at everything you need to know.
What is a payday loan?
Put basically; a payday loan is an emergency cash loan. You borrow a small sum of money over a short period of time, with a short repayment schedule. Due to this short time frame, it is a perfect loan option if you are faced with an unexpected bill that you are unable to pay immediately by yourself. A website such as loanpig.co.uk will match you with a lender offering the best loan option for you.
What do you need a loan for?
Payday loans are specifically designed for those moments in life when you have a surprise bill to pay. This could be anything from a car repair bill or payment for a new laptop that you need for your work. As such, only a small amount of emergency cash is available to tide you over until payday, to be paid back over a short period of a few months. If you need a larger amount of money, with a longer repayment schedule, you should look into another type of loan. Many loan companies offer multiple types of loans. Likewise, if you are planning on using money from your loan to finance your business, you should take out a loan for specific business purposes.
Can you repay the loan in time?
The repayment period for payday loans are short compared with that of other loans. This is because, in theory, the loan is covering the cost of something you would be able to afford after being paid. Repayment periods for payday loans are usually a few months long, a year at the most. This is perfect if you don’t want a long repayment period hanging over you and would prefer to pay your loans back as soon as possible. However, make sure that you are financially able to stick to the short repayment of this loan as late repayments can exacerbate severe money problems.
What is your current financial situation?
Perhaps the first thing you need to ask yourself if you are tempted to take out a payday loan is what is your financial situation like — and answer yourself honestly. Payday loans are great if you need them the odd time you have an unexpected expense to pay, but they are not designed to be used continuously if you constantly find yourself running out of cash at the end of the month. Doing this will only make a long term financial problem worse. If this is the case, seek help from a financial advisor who will help you to improve your situation.