Payday loans have come under criticism in certain quarters recently for a verity of reasons. The amount of interest which users are thought to pay back is one of the main gripes that some people have, as well as the ease at which payday loans can be gotten from different short term loan companies. There are myths, half truths and pure speculation regarding certain issues with payday loans, all of which will be cleared up within this post; but even with this in mind, it’s still necessary to borrow sensibly.
So how do you use payday loans responsibly?
First of all, understand when you should apply. For example, if you desperately need money to pay for emergency repairs or outstanding bills, then you should definitely consider getting a payday loan. However, if you require the money just to head out with friends, knowing full well that you may not be able to pay this off on your next payday, then you may want to consider staying in and saving your money instead. As a rule of thumb, with whatever circumstance you face, if it’s going to cost you more by not taking out a payday loan, then you definitely need to consider this as an option.
Only borrow the money if you know you can pay the money back in full (including any fees and interest) on your next payday. This means that, depending on what you earn, this should dictate the amount you borrow. Lenders will consider this anyway when you apply for a loan, so they will never lend you more than what you can actually pay back anyway, but you do need to think about only borrowing just what you need, and no more.
Early repayment is a good idea if you are using a lender that breaks down your loan interest on a daily basis. However, some lenders will calculate the interest you pay based on your next payday. With this in mind, it may not actually benefit you repaying the loan any earlier. However, it’s always best to check with the lender you choose before applying.
This brings us on to doing your research. Always check the lender’s terms and conditions before applying for a payday loan. That means, check how much you are likely to pay in terms of interest, as well any additional fees and charges. The amount of interest you pay isn’t always as daunting as it looks. For example, some sites state an interest in excess of 2000%. However, it is extremely unlikely that you’ll pay 2000% on what you borrow, unless you don’t repay the lender for an entire year. It’s more likely that you’ll repay around 25% for every £100 you borrow per month. In any case, it’s always worth checking the interest of the lender before you apply.
With this in mind, also check the quality of the lender. Don’t be put off that most lenders will borrow you money. Whilst the payday loans industry still have guidelines to who they can lend to, it’s just not as stringent as banks and other financial institutions. This is no bad thing, as it means getting instant cash advances is a great deal easier than speaking to the bank – ideal if you’re in a financial emergency.
Always be completely honest when completing you application form, and never rush this process, as the smallest of errors may take your application longer to verify. Considering you’ll probably be in an emergency when needing the money, you’ll want the process to be a swift as possible, so just take your time – it only takes about 5 minutes anyway.