For those of us who are not aware of what a payday loan, it can be defined as a short term borrowing resource. This means that payday loans are very different to larger scale borrowing, such as credit cards and mortgages. Payday loans are typically £300.00 in value and can start from as little as £50.00 which it makes it very clear to understand the difference in the resource being presented compared to larger lending choices. As well as offering a specific value of lending, payday loans also have much shorter repayment terms than that of larger lenders too. Sometimes payday loans can be repaid in as little as a one-month term. This means some customers prefer to repay the loan in full on their next employment pay date. Most however take advantage of the instalment style of borrowing on offer. This means instead of repaying the loan as a one-off repayment, a number of monthly repayments are agreed instead. Typically for those who repay in this manner terms are available from as little as 2 months and as many as 6 for example.
Given the specifics of the borrowing resource available from payday loans lenders it is no surprise that realistically, they are only able to serve specific borrowing needs. Their small and short term nature means they will not be suitable for all borrowing needs and in certain circumstances would be absolutely not suitable. Take for example a large scale home improvement, requiring a total cost of £5000.00; this is the type of cost which is not meant to be supported by a payday loan. This may seem like an obvious fact to point out but it is important that any form of borrowing is entered into sensibly and for reasons suitable to the resource available.
With this in mind there are a number of different financial costs which could be supported by a payday loan provider. This could be, for example, a car in need of repair, a broker freezer or fridge, a replacement washing machine or a vet bill. What you will notice is all of these costs are the type which tend to arise un-expectantly and therefore are difficult to plan for in advance. These unplanned costs and bills can be the type of expenses that a payday loan and its small borrowing resources is able to help with. The important thing to remember is the reason for borrowing and as such, only borrow this amount. Payday loans as we have mentioned are designed to be repaid over a pre-agreed, short, period of repayment. This means ideally they should be repaid as quickly as possible. In instances where more than the specific amount needed is borrowed from a payday loans lender, this will undoubtedly extend the term of repayment and also the total cost of borrowing. Therefore when considering these loans we should do so in a sensible and responsible manner, taking into account our realistic and true financial circumstances.