Category: Advice

Will a Payday Loan be too Risky for me?


There are many fears that people have with regards to borrowing and with payday loans they seem to have even more. It can be easy to worry, for example, that they are too much of a risk and should therefore be avoided. There are risks associated with them, as there are with other loans, but if you consider each one, you will be able to work out whether those risks are likely to relate to you. It is worth asking yourself a few questions and this should help you to decide if the risks are too great.

Can I Afford it?

All loans have a cost and it is worth thinking about the cost of the loan and whether you can afford it. This is because when you pay back the loan you will not only have to repay what you borrowed but there will be fees as well. These fees can be high, it depends on what type of loan you have, how much you borrow and how long for. Payday loans do have a reputation of being expensive which is due to the fact that they take risks by not doing a credit check. They cover the cost of these risks by charging more than other lenders. However, if you have a poor credit record and cannot borrow any other way, you need money quickly or you feel this is the best loan for you, then you may feel that the cost is worth it. One way to look at it is to think about the cost of the loan and add that onto the cost of the item you are buying with the loan and think about whether you would still buy that item if it cost you that much.

Can I Repay it?

It is really important to think about whether you will be able to afford to repay the loan. This is something which can easily be forgotten when you are considering borrowing money. It is so easy to focus on the money that you are getting and how much it will be helping you and forget about the fact that you will need to repay it plus interest. Find out how much you will need to repay and consider how you will manage it. Payday loans are set up so that the full repayment is made on the day that you get paid. This means that you repay the loan and interest all in one go. Although this means that the burden of the loan disappears quickly, it can mean that it is difficult to make the payment. Although you are paid that day and theoretically should have the money, if other bills also go out that day or you have had an overdraft to repay, then you may not have enough there to repay it. This means that you could be in trouble. Make sure that you take a look at your finances and that you are confident that you will be able to do it.

Can I manage after it?

It is easy to forget about managing after that repayment. It could be a large chunk of money that is going out of your account at the start of the month. You will then have to manage to pay for everything else with what is left and this may not be anything or a very much smaller amount than you are used to. It is well worth checking your bank statements and working out how much this will be as you will then be able to work out how much you will have to manage on. There might be ways that you can help yourself, perhaps by spending less on more luxury items, but you will need to have a plan in place. Make sure that you know exactly how you will manage your money before you take the loan and then it will not be such a risk.

Although it is not possible to eliminate every risk when you are taking out a loan but it is well worth thinking about what the possible risks are and doing what you can to reduce them. You should be able to find out exactly what you will have to repay and when with the payday loan and this will allow you to calculate how well you will manage this. It is worth spending the time doing this and then you will know whether taking the loan is a good idea and it will help you to know if it is too risky or not. You may regret it if you find that you get into trouble, either with repaying the loan itself or managing your money afterwards and so it is best to be sure beforehand. It should not take that long to do the relevant research and calculations.