A payday loan is easier than ever to take out nowadays, thanks to the widespread availability of the Internet. Most lenders have digitised their operations to a great extent, allowing you to easily benefit from their products and services without even having to leave your home. And since payday loans are among the fastest products on the credit market, their widespread online presence makes perfect sense.
If you are planning to take out a loan and are considering a payday loan as an option, you should educate yourself about the process first, and know what to expect. Contrary to what the media might try to tell you, there is nothing inherently bad about a payday loan. It all comes down to how they are used and the responsibility of the borrower.
Payday loans are widely available and come in various forms, depending on the exact conditions of the lender. Some have quite the high borrowing limits, while others will pay more attention to your working situation. In any case, a payday loan is a quick loan, meant to be repaid much faster than a traditional loan. It’s also less strict on the approval requirements, meaning that you might have a better chance of obtaining one with a bad credit score.
Many creditors offer payday loans as part of their complete service package these days, while some may even specialise in this particular type of lending. If you’ve been working with a lender on a regular basis for other types of loans until now, you might discover that they also offer payday loans.
The main difference is the repayment deadline. In most cases, you’ll have a month or less to pay back what you owe. That’s where the name comes from too – although you should not interpret it too literally, as a payday loan is not necessarily tied to your actual pay date. This is an important caveat, as you’ll want to plan ahead to ensure that you’ll have the money on the exact date.
Otherwise, you’ll have to deal with very high interest rates that might become difficult to bear if you’re not prepared. A payday loan is a great tool in the sense that it provides you with a quick burst of cash, but you should have a responsible attitude to the money you’re getting from it, and have a plan for paying it back.
This leads us to our next point. There are a few factors that you’ll always want to keep in mind when you’re borrowing money, and be prepared to deal with the consequences at any time. First, as we mentioned above, understand your financial situation and know how much you can pay back at a realistic rate. Most lenders aren’t going to look into your finances in enough detail to do that calculation for you, so there won’t be any safeguards you can rely on to keep you from borrowing too much.
A payday loan is supposed to be an emergency short-term tool that helps you cover urgent situations. It doesn’t make sense to use them on a regular basis, as there are other products on the credit market better suited for that. In fact, if you look at some stories about people getting in trouble through payday loans, it usually boils down to someone treating them like a source of free money.
One of the good things about a payday loan compared to other types of loans is that it’s usually much easier to qualify. You don’t need to have a good credit score in most cases (more on that below), and even though a payday loan is tied to your salary, some creditors will not actually ask you for proof of employment. You’ll just have to provide your income figures yourself, and if you’re not honest about them, you are the only one who stands to lose.
Some lenders will insist to know that you’re actually employed and earning above a certain threshold though. Look up the terms and conditions of the lender you’re considering, and be prepared with the appropriate documentation. Having printouts of your payslips ready can save you a lot of time, and considering the typical situation where you’d need a payday loan, time is certainly a resource you should be trying to optimise your use of.
We already touched on this above. Taking out a payday loan with a bad credit score is perfectly possible with most creditors on the market. In fact, people with poor scores are among the main intended users of payday loans in the first place. That said, don’t expect every creditor to immediately overlook anything you might have on your report. Certain factors are still going to raise some eyebrows – like having defaulted on a loan in the past.
With that in mind, try to do your best to maintain your credit score at a sufficiently high level, so that you’ll have access to the full range of products on the credit market. When you need to take out a loan one day, you’ll have a much better variety of options available. This will affect your choice of payday loans to some extent too. Although in the end, as we said above, you can get one even with a bad score in most cases.
There will always be multiple offers out there, even with the same creditor. Try to explore the market as much as your current time constraints allow you to. You might find that a better deal is waiting for you right around the corner, and it’s sometimes easy to miss the best offers if you’re not careful. Sure, a payday loan is often small and a difference of 10-20% in the repayment sum might not matter that much in the long run, but considering that you’re probably in an urgent situation where every cent counts, you can definitely benefit from comparing more carefully.
It might also be worth waiting, although that’s often not possible when you’re in need of a payday loan. But if you can afford to take your time for a while, you might discover an even better deal a week or two from now. The payday loan market is very dynamic, and lenders constantly adjust their rates according to a number of factors. It can be difficult to predict when the best deals are going to be available, so the best thing you can do is to simply keep checking back regularly. On the other hand, try not to waste too much time – deals are never going to get better above a certain threshold.
As we said above, you should also have a solid plan for repaying that loan in a timely fashion. Whatever you do, don’t postpone your payments on a payday loan! This can turn an already complicated situation into something that might last for months on end. This is the way most people mess up their finances with the use of payday loans, and it’s the responsibility of the borrower to ensure that they know what they’re doing.
Use all available tools to help yourself in this, and to get a better overview of the situation. For example, use a budgeting application to take control over your finances and to know where every cent is going. You might realise that you’ve been wasting a lot of money up until now once you start tracking those expenses properly.
You should also watch out for a few flags that can indicate that a deal might not be that good for you. Even if it’s just a £1000 loan. Check out the history of the creditor. If they haven’t been around for that long – something which should be very simple to verify – you might want to look for another company. Many companies on the payday loan market keep popping up and disappearing shortly after, and they are often not ideal to work with. You should only look for reliable, established creditors with a proven track record.
Look at the fine print as well. You’ll want to know every detail of repaying this loan, and ensure that you’re not missing anything. What kind of interest rate will you have to deal with if you miss a payment? What are the upper borrowing limits and are they aligned with your current salary? There are many factors that will come into play here, but you might not have enough time to compare them all.
If you play your cards right, taking out a payday loan online doesn’t have to be a negative experience. It can be a good way to get out of a bad financial situation, and it can also teach you a thing or two about managing your finances better in the future. Once you’ve been forced to go through a challenging situation like that, you’ll start seeing your finances in a different manner. That is, as long as you’re willing to actually learn something from the experience.