How to use Payday loans correctly
Payday loans are designed to help people cover sudden and unexpected financial emergencies when they are faced with having to pay bills right away.
Everyone knows what it is like to be rich. We have all had daydreams about what we would do if we won the lottery. The usual things such as buying a big house, going on a luxury holiday, buy a sports car or two. Rich people do not daydream about riding the bus to work or having budget until their next payday.
Being wealthy is the luxury of never having to worry about sudden financial emergencies wiping out our hard-earned savings in a flash. No one likes those unexpected bills dropping on the door mat demanding payment for one thing or another.
When faced with having to pay these bills we must make a tough choice and that is do we use up our savings or do we take out a loan to cover the cost of the bills?
If you have a regular income from a steady job you might consider taking out a loan to cover the cost of whatever is demanding payment right away. Taking out a loan does mean that we would be paying out more over a longer period than paying the bill right away but if paying off the bill right away will leave us broke then maybe the loan is the better option.
Payday loans are designed to help people cover sudden and unexpected financial emergencies. So, maybe contrary to what you may have heard or read about payday loans lets look at how payday loans could help you out.
Payday loans and how to use them
Payday loans are the new kid on the block when it comes to consumer credit products. In the relatively short time that they have been around payday loans have acquired a bit of a reputation of being expensive and a con. Let’s consider the reasons that payday loans exist.
No product can exist without a market. That’s as simple as capitalism gets. You could invent something today but if no one buys is then you have no product. The same applies to payday loans, if there was no demand for them, then payday loans would have gone the way of the infamous Sinclair C5 car and consigned to the rubbish heap of also ran ideas of history.
Payday loans were created to fill a gap between personal loans from the bank and credit cards. Banks were not interested in lending small amounts of cash for short periods of time and credit card companies were not interested in providing cash loans to consumers to pay debts or bills. For instance, how many landlords or local plumbers accept credit cards virtually none, they all want either bank transfers or paid in cash.
Hence payday loans were created so you could get cash now paid into your bank account to withdraw as money to pay the plumber or transfer to pay the rent.
In the early days of payday loans, it was like the wild west and lenders were charging obscene amounts of interest for these short-term loans with high fees if a borrower was late with a repayment, most of the bad publicity stemmed from these firms. That is until the Financial Conduct Authority stepped into the market to clamp down on firms taking advantage of borrowers with high fees and other charges. In 2014 the FCA started to implement caps on how much interest could be charged per day and caps on fees and charges.
Payday loans have been used by millions of people in the UK who have benefited from the ability to access cash fast for short periods who otherwise would have gone without potentially the bare necessities such as utilities, travel, buying new clothes or worse scenario having to miss meals.
Provided these payday loans are used as they were designed to be used and that the borrower has budgeted the repayments then payday loans work well.
Choosing the Right Payday Direct Lender
A quick search on your favourite search engine will reveal dozens of direct payday lenders are claiming to be the best, the fastest, the highest acceptance rate. But which one is really the one for you?
If you have the time to do your research, then it is recommend that a through search of the lenders name on reviews sites is probably a good start.
What have other borrowers said about their experience with the lender, was it easy enough to contact them, were they approachable. It may be a good idea to call the direct lender yourself to see if they are welcoming and open about their services. Remember that you are the customer and they rely on your as much as you depend on them to grant you a loan.
There is always the concern that the lender may not be legitimate, one way to find this out very quickly is to head over to the Financial Conduct Authority website to do a quick search on their register for the company name and check that they are indeed approved. If they do not appear on the register, then best give the firm a wide berth and look elsewhere.
Many people will have their own opinions on who they consider to be the best payday loan lenders in the UK. There are those who will swear blind by one where they have had nothing but good experiences whereas someone else will not give them the time of day.
Finding the best payday loan lenders can be more challenging when you are under pressure to get money fast to pay off demanding bills and such like and you might find yourself with not the best deal. So, before you accept a loan offer just take a few minutes to do at least a little research, so you have some peace of mind.
Be honest with yourself
Before you apply for a loan ask yourself if you really need to borrow money from a payday lender. Is there any other way in which you can get the money you need?
Here are some suggestions for getting cash now when you need it:
- Ask friends or family for a small loan
- Sell something on eBay
- Ask for a pay rise at work
- Take more hours at work
- Take on a second job
Only the first point might get you the money you need right away if your friends or family has access to money there when you make your request.
All the other methods may take a little while to come through. Although with selling items on eBay might give you the cash within hours of posting an item for sale. When your item sells on eBay the buyer will transfer the money to your PayPal account. The only issue with this method is if the buyer cancels or demands a refund. So, make sure when you post items on eBay that you describe the item in detail with lots of pictures.
If you do ask and get a pay rise and can hold off for until your next payday by stalling the payment of the bills might be a thought worth considering.
Only borrow what you need
It can be incredibility tempting when taking out any type of loan to ask for more than you need. As tempting as this might be to take out an extra £20 or £30 you must bear in mind that you are expected to repay the money. You want to borrow the absolute minimum amount to cover your emergency expenses and not a penny more.
Choose your loan instalments
Anyone who has taken out a loan in the past will tell you the same thing and that is to only borrow what you can afford to pay back each month. They also say to spread the repayments over a period of time that you will not feel burdened by the repayments but also you do not want to stretch the repayments out for years. Payday loans are great in that you can choose to repay the loan either on your next payday or over the a few months. You are in control of the instalment periods. Although in some cases the direct lender may suggest a longer or shorter loan instalment period than the one you chose due to the loan amount.