5 Questions To Ask Yourself Before Borrowing A Payday Loan

5 Questions To Ask Yourself Before Borrowing A Payday Loan

Despite payday loans and short term loans being very beneficial in certain aspects, this isn’t always the case. Borrowing for the wrong reasons can lead to serious money problems. Therefore, before you dive into the deep end and apply straight away, it’s time to start considering your actions and understanding the potential consequences. This way, you’ll find yourself approaching situations with a different outlook in order to make the best decision. In this case, we understand that not everybody has the best financial management skills and that opting for the fastest solution is always an immediate thought. However, perhaps, in the long run, there are other options you would have wished to have chosen. Therefore, in order to get you thinking, we have gathered five questions you should ask yourself before borrowing a payday loan.

Why Are You Opting For A Payday Loan?

The main question you need to ask yourself when borrowing any kind of credit is simply why. Why are you opting to borrow a payday loan and what is the purpose of it? Having a simple answer to this question will make the process much easier. Once you have considered your answer you’ll be able to conclude and finalise your decision. There are numerous types of credit that you can apply for online, payday loans are just one of many. Therefore, before making any quick changes, considering all types of credit to find the one which is most suitable to you, your personal finances and your current situation is the best idea.

How Much Do You Need?

When you are borrowing a payday loan, you should be borrowing for emergencies only. This kind of loan offers a very quick and easy solution to the unexpected debts and bills that might come your way. Therefore, when you’re planning to borrow, you will already have an idea of how much you may need. As a whole, payday loans typically range from £100-£1500. However, we understand that not everybody needs a minimum amount of £100. Therefore, we have lowered the minimum borrowing amount to £50, giving everybody a chance of success. If you want to borrow anything outside of this range, we suggest looking for different types of credit.

Can You Afford A Payday Loan?

Just like any other credit, there are extra costs. These are known as interest rates or APR. These extra costs can be explained as the cost of borrowing money. So, when you are calculating how much your loan will cost before applying, ensure you take a look at the representative APR to get a rough idea of the cost. This way, you will be able to identify whether or not you can afford the loan before even starting your process. However, the representative APR should only be used as a guide as the actual amount is based upon your personal credit.

Will Borrowing Damage Your Credit Score?

The whole process of borrowing and repaying a payday loan can be seen as a risk. You never know how you will handle the situation until you are faced with it. If your financial management skills are strong and your repayments are complete, you may find that your credit score is increasing. Having a positive relationship with your loan will reward you in the long term. However, if you are the opposite, a payday loan could potentially damage your credit score.

One aspect which can have an immediate negative impact on your credit score is applying too much. Applying to numerous lenders will only cause your credit score to decrease as each individual lender will be conducting a hard credit check. This is to check how much of a risk you may be before lending to you. However, in recent years there has been a rise in bad credit loans, helping those who may have this problem.

Are There Any Alternatives?

There are plenty of alternatives that you can consider if you don’t feel as though a payday loan would offer what you need. Some of the most common examples include:

  1. Borrowing from friends and family
  2. Using finances from other accounts e.g. savings
  3. Find another stream of income
  4. Seek external professional help for guidance

Payday loans do not suit everybody. In fact, we suggest searching for other options like these before applying online, as opting for a safer alternative will keep you away from further debt and financial worries. On the other hand, a short term loan can be extremely helpful to the right crowd.