Right and Wrong Ways to Use a Payday Loan
Loans to payday are a fairly recent arrival in the UK, but one that is very welcome to many people. They are a blessing to anyone who needs money in a hurry, but does not have time to go through the ponderous process required by conventional lenders. However, there are both right and wrong ways to use loans to payday.
Need Emergency Funds
The most common reason for looking for loans to payday is finding you have a sudden unexpected expense for which you do not have the cash immediately available. One such emergency might be a serious car breakdown. If you find you need a new clutch or gearbox, this could mean a bill for several hundred pounds, which you need immediately as you require the car for work. Domestic emergencies also crop up when you least expect them. When there is water coming through the roof, and you find you need an urgent roof repair, or your boiler breaks down in winter and you are told it is beyond repair, these are not things you can put off till it is more convenient. You need the money now. Another possibility is an unexpected vet’s bill. If your dog get knocked down by a car and breaks his leg, you have to find the money without delay. This is when loans to payday can be a real godsend.
Non Emergency Funds
Of course, loans to payday are not only there for life’s major emergencies. If you decide to start a new hobby, such as carpentry or fishing, needing some equipment which requires a modest financial outlay, a long-term loan from a conventional lender would not make sense, and would probably not be approved. Or if you make a snap decision to take your family on a weekend break to Amsterdam or Paris, you can get the money for this with the minimum of fuss.
Short Term Not Long Term
Some advisors do warn against loans to payday, and people are sometimes very wary of them. This is because they can be used in the wrong way. This type of loan is actually a cash advance to tide you over till payday, when you can pay it back, or at least some of it. If you use it as a means of survival because you cannot manage your finances, and keep borrowing on a regular basis you are going to get into trouble. Interest rates on payday loans are high because they are intended for short term borrowing, using them for long term borrowing will get very expensive indeed.
In order to get the full benefit from loans to payday, you need to be quite clear what they are intended for – that is, a temporary advance to tide you over. In other words, before you take one out, you need to know exactly how you are going to pay it back. Loans to payday are meant to make your life better – and if used correctly, that is what they will do.