3 Questions to Ask Yourself before Getting a Payday Loan
Whether it’s good or not, most Britons know what living from paycheck to paycheck means. While some consumers have a decent regular income, others are struggling to meet basic expenses and that’s the reason why unexpected financial difficulties make them so vulnerable. According to the recent statistic, more and more British consumers come to a decision to use payday loans to deal with financial emergencies. Definitely, there are reasons why people choose short term financial solutions over other options. But how to understand if a payday loan is the right choice for you? There are 3 important questions to ask before submitting loan application.
What is Your Reason for Getting a Payday Loan?
You want to get maximum use of a loan, don’t you? Then it’s important to understand the specific of your situation and to find the most appropriate option. For example, you have faced a need of making an unplanned purchase. Maybe, you need to buy a detail for your car or make an urgent repair in your house. The most important factor is that your budget is already planned and there’s no space for emergency expenses but at the same time, you can’t wait until you get the next paycheck. In this case, getting a loan till payday can be effective. But if you want to get an unsecured short term loan to pay monthly bills or to buy a luxury item – that’s the wrong choice.
Is an Interest Rate Affordable for You?
There’s no doubt, payday loans attract many consumers by an extremely easy application process, fast approval and availability for consumers with less than perfect credit. But there’s always the other side! In this case, it’s high interest rates charged by payday lenders so payday loans are known as a quite expensive type of credit products. That’s why it’s worth paying special attention to a cost of a loan and to use a regular loan calculator to get to know the APR. Also it’s worth keeping in mind that in case you will fail to pay on a loan on time, the payday loan company (lender) will charge a late payment fee which will make the loan cost higher. Ask yourself if you can handle this and don’t accept loans with an easy application process lightly.
Will You Need a Further Loan to Repay the Original one?
That’s when it’s worth being honest and to ask yourself if your paycheck really affords repaying a payday loan and meeting further casual expenses. One of the most popular mistakes made by the borrowers is getting a short term loan for wrong reasons, so when repayment time comes they realize they don’t fit the budget and get a further loan to pay the original. That’s what called a debt cycle!
One of the best things you can do is to take a pen a paper and calculate all your expenses for the next month. Add your loan including its cost and compare the total cost to the size of your paycheck. Be realistic and don’t hope for any other money except of that you will really get in your upcoming paycheck.
Payday loans are easy to get and they can help a lot if you need to cover some expected expenses. On the other hand, despite they are small loans, it’s not worth taking them lightly. Make sure you have the right reason for taking out such a loan. Consider alternatives, for example, borrowing money from relatives or friends, when you can avoid paying the interest. Know the exact cost of a loan and make sure, your next paycheck will cover it together with loan body and also you’ll be able to cover your other necessary expenses. Understand, even a small loan till next paycheck is a serious financial commitment and you still have to consider all the pros and cons before taking out one.
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