Thanks to the current rise in cost of living and the impending cost of living crisis, most people are having to stretch their budgets to the max. And even with careful money management you may find yourself in an awkward financial situation should an unexpected bill arrive or a financial emergency arise.
Some people may be lucky enough to have an emergency fund in place or have savings that will allow them to cover the cost of an essential repair or medical emergency. However, not all individuals have enough savings to handle unexpected expenses and thats when many may need to resort to borrowing. If you know you only need the money to help tide you over for a few weeks, until your next payday or until you know you have money coming into your account, then a payday loan may be the best way to get the money you need.
Always remember to apply for loans only when needed. Be careful in borrowing larger amounts because you might not be able to repay it on time. You should be discrete in determining which expenses are urgent and those that can wait until your next payday. Don’t waste your hard earned money just because you have an instant source of cash; otherwise, you will be trapped in a situation that you will regret in the future.
Lets look at the pro’s and con’s of Payday Loans
Payday loans have become an increasingly popular choice to cover unexpected costs, make urgent payments and tide borrowers over in the short term. While they are convenient, taking out a short-term loan might not always be an ideal solution, depending on your personal circumstances.
Pros of Payday Loans
Payday loans are designed for unexpected situations that may arise, emergency bills or payment that you may not have foreseen but require paying immediately. They should only be used in situations where you don’t have access to any other funds to allow you to cover the cost. The intention is that they will be repaid, usually in full, from your next wage. Here are some of the key advantages of payday loans.
- Easy to access
- You can get approved with bad credit
- Fewer requirements than long term loans
- Money can be in your account within hours
- It is an insecure loan
Cons of Payday Loans
While there is no denying that payday loans are often quick and convenient, this category of lending can come with significant drawbacks. This means that payday loans aren not suitable for all borrowers, and they could make it harder to improve your financial situation if they are not managed responsibly.
- They are expensive – high interest rates
- Easy to get trapped in a cycle of debt if not used responsibly
- Payday loans are considered predatory
- Some lenders require a CPA (Continuous Payment Authority) This means that the lender has access to take payments from your bank account up to the amount it chooses subject to there being sufficient funds in the account. This may take you over your overdraft which may result in bank charges or other financial complications.
In conclusion
There are good and bad points to payday loans which you need to weigh up against your personal circumstances and other financial commitments. They may well be the answer to that unexpected bill in the short term if you know you can afford the repayment in the time it is due. But they aren’t the answer for everyone.
Those who are struggling with their finances can seek free help and advice from organisations such as Step Change. This organisation offers its services to assist you through your financial situation, providing advice on how to take control of your debts and create a personal budget.
