In this payday loan related article we are going to take a look at both the pros and cons of taking out a payday loan.
It is important for you to understand that a payday or short term loan should only be taken out by you if you are in genuine need of financial help to tide you over to your next payday and should never be used simply to fund a leisure activity!
Benefits of Taking out a Payday Loan
Below are a few benefits of taking out a payday loan, short term loans are not suitable for everyone, and as such please only consider taking one out if you know you can repay the loan and interest on time and you have no other way of accessing cash.
- Cash Sent to You Instantly – Once you have been approved for a payday loan the cash is often sent to your bank account instantly and it therefore available to be withdrawn from your bank account as soon as it has appeared. Most banks and building societies in the UK have a speedy payment service which allows companies such as payday lenders to offer this fast payment service.
- You Can Apply Online – The on many benefit of a payday loan is that you can apply for one online at any time of the night or day. You do not have to visit a local office or even speak to anyone. As soon as you fill in the form you will then be given an instant decision. Remember to read through our guide to avoiding payday loan websites which have additional charges.
- Higher Loan Amounts – As soon as you have built up a track record with any payday lender, you will find that they will gradually increase the amount of cash they will lend to you on any additional payday loans you request. So by paying back a loan on time you will always be safe in the knowledge that should you need emergency funds in the future they will always be available.
Aspects of taking out a Payday Loan you need to be aware of
Below we have listed some things that you need to be aware of when taking out a payday loan. This listing may put you off taking a loan out. However, you do need to be aware of them and should think long and hard before applying for such a loan.
- High Interest Rate – The one major downside to taking out a payday loan as opposed to getting a small loan or overdraft from your bank or building society is that you are going to have to pay a larger amount in interest to the payday lender. If you can get a loan from a bank or building society then you will always end up paying a lower amount of interest.
- Additional Fees May Apply – If you are not able to repay on time then you may get hit with several payday loan additional fees or charges. You should therefore only take out a payday loan if you are 100% confident that you can repay the entire loan and the interest on the day you agreed with the lender. If you do not pay the loan back on time then those additional fees and charges can grow and will see your original loan costing even more than you expected!
- May Affect Your Credit Rating – As most if not all payday loan lenders are going to use a credit rating agency when making a decision on whether to give you a loan or not, if you do not pay it back on time then this will be noted on your credit rating. Many companies will also check your credit rating if you want to take out credit in the future and if they see you take out payday loans regularly they may refuse you a loan or credit!
Before taking out a payday loan please do look to see if there are any alternative open to you based on your current situation. If you can borrow some cash from a friend or a family member then do so as you are unlikely to find that they are going to charge you any interest at all!
However, we do know people do not like asking friends or family for a short term emergency loan, so if you have looked into every possible way of obtaining a loan and have no other option but to take out a payday loan then shop around for the one offering you the lowest interest rate!