There are many payday lenders out there these days and we may wonder at times whether this type of loan will be suitable for us. This is a worthwhile question to ask yourself as you need to fully investigate what a payday loan is and whether it is something that you need to use in certain circumstances. It is a good idea to actually know about all loan types because you will be able to make the right choice when you need a loan and you will know that you are choosing the one that is most suited to your needs.
What is a Payday Loan?
Payday loans came about because it was seen that there were no borrowing options for people with a poor credit record. It meant that if they needed money in an emergency, there was nothing they could do to help themselves. Therefore, lenders set themselves up in business to address this problem. They therefore did no credit check and lent money to people that had a poor credit record. However, because they were taking on a risk, they did not lend massive amounts This is still the case with payday lenders allowing anyone to have a loan but only lending up to about £1,000 in total. The repayments for the loans are also different to how most other loans work. They have to be made in one go. This means that the whole amount that is borrowed as well as the interest and charges all have to be repaid in one go. This repayment date is set to be the date that you are paid, hence the name and therefore there is a much better chance that you will have the money available to repay it.
When Should They be Used?
Payday loans are designed to help out in emergencies and therefor they are very quick to arrange. It is possible to have the money within a few hours with some lenders which means that they are quicker than many other types of loan. This means that if you need money extremely quickly then this can be a good option for you. They are also designed for those with a poor credit report but they are not limited by this so you can use them even with a good credit report. However, it is wise to look at all of your options as it may be the case that there will be cheaper options available to you if you have a good credit report. They may not be so quick to organise though.
Are They Right for me?
Whether they are right for you will very much depend on your specific situation. If you need money quickly then they can be handy, but if you have an overdraft facility or credit card then these might be better options for you. If you have a poor credit record then it is unlikely that you have these then this might mean that the payday loan will be the only option for you. It is a good idea to think about whether this option is something that will appeal to you and also whether you will be able to manage the repayment. If there is just the one repayment and it has to be made quickly, then you will need to make sure that you will be able to pay it and pay for everything else that you need as well. It is no good getting one out and then once it is repaid, having to get another one because you run out of money. So, you need to be careful. You also need to think about the cost and whether you are happy to pay that much for a loan.