If you’re under pressure to pay your bills or buy a new appliance, then borrowing a small sum of money from a pay day loan company can be tempting. However, before you take out a loan of this sort, you need to be fully aware of what you’re getting yourself into. These loans can be very helpful, but only if they are used in the right way. Here are some essential things to consider:
1. Are The Interest Rates Too High For You?
Pay day lenders are obliged to publish an APR. This is short for ‘annual percentage rate’, and would be the amount of interest you’d pay if you had the loan for a whole year. It isn’t unusual to see a pay day loan company with 5000% APR over a year. Some pay day loan companies might use different terminology to this, so make sure you know the interest rates in full before applying.
2. Are You Ok With the Lender Having Access To Your Bank Account?
Many pay day lenders allow you to use a debit card to apply for your loan, however, once they have these details they can take the repayments from your account without checking with you first. You do have the right to cancel payments if you can’t afford them, but it can be difficult and you’ll end up in more debt overall.
3. Can You Ask Somebody Else to Help You Out?
Before you consider a payday loan, talk to your friends and family first. Somebody may be able to help you out, and you might even be able to arrange repayment in a few installments. They might not charge you any interest either, which is a bonus!
4. A Pay Day Loan Should Only Ever Be Considered a Short Term Solution.
A pay day loan should be taken as what it is – a loan until next pay day, paid back in one big chunk. People can get into a bit of a mess when they don’t realise this, and end up in debt. It’s important that you use a pay day loan the right way. In an emergency, they can be very helpful indeed; this website has some more info. If you’re only borrowing so you can have a night out on the town, it isn’t worth it.
5. Be 100% Sure You Can Pay It Back.
You’ll need to work out your money coming in and money going out so you can be 100% sure that you can pay this loan back. Many pay day loan companies check to make sure you can first, but it’s really up to you to figure out the numbers.
As you get the loan so quickly too, it can be easy to get yourself into the habit of borrowing money very often – it can become a vicious cycle. Try to remain sensible with your money, and get advice if you feel you’re in trouble. Let us know how you got on in the comments!