In order to ensure any form of new borrowing is suitable, there are a number of different things we, as consumers, can do. In order to understand why these steps are important and really do make a difference, likes look at completing them in relation to a specific type of borrowing. For the purpose of this exercise we’ll look at payday loans. For anyone who is not aware of payday loans and what they offer, let’s first do a summary of the product on offer here. A payday loan can be used for a variety of different reasons given their flexible nature. Generally however, their uses are refined to smaller financial concerns, given the fact the loans available range from £100.00 to £750.00. The amount which is approved will depend on the individual applicant and their circumstances and the resources of the individual lender. The terms of repayment which are on offer again will depend on these factors but are generally considered flexible and give applicants a good deal of selection. As such, repayments can usually be made over a number of months if required, starting from a single and one-off repayment and then a selection of monthly terms. Today then let’s look at the things which we must consider when considering payday loans.
First and foremost, before any form of new borrowing, including the resources on offer with payday loans, we have to ensure the resource matches our need. This means making sure our reason for borrowing is suitable to the loan value and terms of repayment which are available. In simple terms this means making sure our reason for borrowing is appropriate. Where we would likely consider a credit card for a large purchase we may then consider payday loans for a small cost. Borrowing from a payday loans lender for a large cost will likely lead us into repayment difficulty at some point in the future. The second consideration is how affordable the repayments of a new loan will be to our individual circumstances. The best way to understand this is via the completion of a quick and easy to do budget planner. Completing a budget simply means listing all of costs against your total outgoings and therefore being aware of the amount which is deemed as spare. Obviously any new financial commitment, including payday loans, would need to come from this spare and ‘disposable’ income. This understanding your budget and what its limitations are well really made a difference to the overall borrowing decision you make.
Providing the right type of loan is selected for your needs and the repayments of the loan are affordable to your budget, there is no reason why a payday loan or any other type of loan cannot be a sensible choice. Lastly it is always wise to remember that the longer the term of repayment, the higher the total cost of credit will be. So with this in mind be mindful to select the shortest and most affordable term of repayment to suit your individual needs.