Payday loans have become the latest buzz word in the UK financial world recently. Payday loans are a short term loan that you may acquire when you are facing a sudden financial crunch and need some emergency cash. These loans can be a lifesaver when your savings have exhausted, your next cash cycle will take time to flow in and you need to make an emergency payment. Getting a payday loan is not very difficult. There are a lot of payday loan providers who will arrange short term loans for you within minutes and some might also offer you great payment plans. However, you need to be careful when you are taking out a payday loan or else you can end up in a financial nightmare. Here are 5 things that you should consider before you decide to go for a payday loan.
- Can You Do Without This Loan?
This is one of the most important questions to ask yourself if you are considering taking out a payday loan. Payday loans seem very attractive because of how liquid they are. You can get a handsome amount of money in few minutes and you can take a flight to your favorite destination or buy an expensive diamond ring. However, this is not why you should be taking these loans. Educate yourself about Payday loans work. These loans have APRs of over 1000%.
This means that you can possibly end p paying way more than you borrowed. The payments can dent your credit profile for months and your debts can soar uncontrollably. Make sure you are only going for payday loans when you need it in an extreme emergency. It is fine to take out a payday loan once or twice in your life but this facility is not meant to be used as a tool of regular cash flow management.
- Do You Have Any Other Alternative Cash Flow Options?
If you are in a cash flow crunch and are tempted to take out a payday loan, make sure that you have considered all other alternatives before you go for this one. This is because payday loans are the most expensive type of borrowing and can burden your future cash flows for a long time. It is recommended that you consider alternatives such as selling an asset, or borrowing from a relative, a friend or even another financial institution such as banks on easier terms rather than going for a payday loan.
- Can You Buy Some Time For Your Payments?
If you are taking out a payday loan to be able to pay a due payment, consider speaking to your creditor and try buying some more time. Offer him to pay something over and above the due amount as a penalty if need be. This will still be a lot easier than making payments at over 1000% APR every month.
- Are You Aware of All the Fees That Are Involved?
When you take a payday loan, your monthly interest payments are not the only fee that you might have to pay. There could be numerous other types of fees involved depending on your contract with your lender. Make sure you know what you are signing up for.
- Are You Able to Repay The Loan in Full
It is important to ensure that you are financially stable enough to be able to repay your complete payday loan if you plan to go for one. Failure to do so can lend you in severe financial and legal trouble. In extreme cases you can be taken to court and can be sued for the compounded amount that you are liable to pay.
If you would like to get further consultation regarding payday loans feel free to get in touch with our consultant Robert Pokladow.