There will come a time in your life when you’re faced with an expense you may not have accounted for. This could be anything from emergency vet bills, to an urgent home repair that can’t wait until you’re paid at the end of the month. This is where a payday loan direct lender can help. A payday loan is meant to help tide you over until your next payday and can be helpful if you don’t have savings or an alternative way of financing issues that may crop up. Because payday loans have a short repayment period, it’s essential that you use them in the right way to avoid falling into debt. Read on as we look at how to use a payday loan responsibly.
How much do you need to borrow?
The first place to start when borrowing responsibly is to work out the amount you need to borrow. Short-term loan lenders typically offer smaller amounts of cash, around £500 or less depending on the lender you choose. It’s essential that you calculate accurately exactly how much you need to borrow to help you deal with your current situation – no more and no less. Applying for more than what you need will become more costly in the long run, with interest and additional fees to pay back – which could lead to you struggling to manage the total cost of the loan.
Read the small print
When applying for a payday or short-term loan, it’s essential you read the small print. This is where the terms and conditions, as well as information on additional fees, is likely to be located. It’s rare your borrower will set out loan requirements on the initial advertisement or website. Be sure you thoroughly check the small print to ensure you’re not taking out a loan you can’t afford. This will ensure you know exactly what’s expected of you in terms of repayment and means you can find a lender offering you the best deal.
Work out the total cost of borrowing
When taking out a loan, you need to remember that the amount you’ll be paying back isn’t just the amount of the loan itself – it’s the added fees that come along with it, for example, the interest, admin, and late repayment fees. When you apply for a loan, it’s crucial that you consider how much it’s going to cost you to pay back including these additional fees, as this could end up being more than you can afford. Short-term and payday loans typically come with higher interest rates, as they have a short lifespan and therefore lenders won’t make as much back. Their short lifespan also poses more of a risk to lenders as borrowers may struggle to pay them back in full. To ensure you’re borrowing responsibly, make sure you work out exactly how much you’ll be paying back so you can work out whether you can afford it.
Emergencies only
Whilst it’s tempting to take out a payday loan for a bit of extra cash – to head off on holiday or to treat yourself to something new, you should avoid taking out a short-term or payday loan for anything other than an emergency. Payday loans are a good option when you have nowhere else to turn, to help you out of a stressful situation when your cash flow cannot accommodate this. But getting into a habit of taking out loans for things you don’t really need can be detrimental to your financial health, and can see you becoming trapped in a cycle of debt.
Payday loans can be used to help with an unprecedented expense your monthly cash flow cannot stretch to cover. They can be helpful when it comes to dealing with emergencies, and the easy application and approval process means access to cash quickly. However, they must be used responsibly – failure to do so could result in further financial difficulty.
