Does a Payday Loan Suit all Borrowing Needs?

It can often seem like a payday loan is advertised as being able to help anyone in all situations. However, it is important to realise that there are lots of different types of loans and these all serve different functions. Some loans are specifically designed to pay for certain things whereas others have different features. By understanding a bit more about payday loans, what they are and how they work, you can decide whether they are the right thing for you.

What is a payday loan?

A payday loan is set up in a specific way. As the name implies, the loan is designed to keep you going until you next get paid. This means that you will be able to have a bit of financial help to keep you going if you run out of money before you get paid next. In order to make repayment easy you will set up a direct debit so that the amount you borrowed plus costs all come out of your account in a lump sum then. You will have to pay interest and some charges in with this, but you should know how much is due to be paid as there are calculators on payday loan websites to show you this.

You will normally be able to borrow a few hundred pounds but you may be able to get up to £1000 depending on the lender, your salary and whether you have borrowed form them before. There is no credit check so if you have a poor credit rating then you need not worry about this. You will need a bank account though and an income.

Payday loans can be organised very quickly. You may even be able to get the money within a few hours. This means that if you have a financial emergency, they can be the answer that you are looking for, especially if you do not have access to any other sort of borrowing.

Who and what are they for?

Payday loans were set up for those people that have a poor credit rating and therefore have little access to forms of borrowing. It was felt that this was not fair and meant that they missed out with help that they desperately needed and so the payday loan started. This is why there is no credit check done when you take out a payday loan. They are also designed to help out those who need money really quickly which is why they can be organised so fast.

What borrowing needs do they suit?

Whether a payday loan suits you will depend on what your borrowing needs are. Firstly, if you need money quickly and have no other options then they will be what you need. If you have a poor credit rating meaning that you cannot borrow elsewhere then they will also suit you. If you need a few hundred pounds then they could suit you but if you need more than £1000 then you will need to look for a different type f loan. You will need to be able to repay the loan and interest all in one go when you next get paid so you will need enough money available to do that. You will need to have a regular income so that you are capable of repaying the loan when necessary. You will also need to have a bank account so that you can receive the loan and set up the direct debit.

There are not really that many constraints on a payday loan compared to other loans, although it may seem like there are quite a few. However, it is important to make sure that you do choose the right loan for your borrowing needs. Consider what the loan is for and how much you need to borrow as well as how much you can afford to repay. Then you can compare different loan types and see which look like they will suit you the best as well as giving you the best value for money. It can be a tricky decision to make but it is an important one as it can make a big difference. You need to address your financial needs in the best possible way but also make sure that you are not paying more than necessary for it. This can be tricky. It can be hard not to make a rush decision when you need money quickly but it is wise to spend as long as you can looking at all of the options so that you can compare them and find the right solution for you. Only then will you know that you are getting the best value for money that you can get. So, try not to panic and sign up for the first loan that you see but look at all of your options and consider everything before you make a choice.