Payday loans are often seen as the very worst type of loan. With huge fees and interest rates, the costs can spiral if you do not make the repayment on time. However, many people do not realise that it is possible to pay more on an unauthorised overdraft with some banks. However, there are a few circumstances, when you may find that a payday loan is an option for you.
Bad credit record
If you have a bad credit record, then you will find it difficult to borrow money. Many lenders will not offer such good rates for those with a bad credit record and some may even refuse to lend at all. If you need to borrow some money this could mean that you may have to fall back on this sort of lender. Make sure you do your research though and make sure that you check your credit record to see if it is correct, in case it looks worse than it should be and also compare different lenders to see who has the best rate.
Know you can pay it back
A payday loan normally needs you to repay the loan in full plus fees and interest on a specific day, usually your pay day. You agree that date with them, so you need to be completely sure that you will have the money available to repay it on that day. If you do not manage to pay it back on time, you will end up having to pay extra fees and possibly higher interest as well. Costs are added on daily or sometimes hourly for late repayments and so they can build up very quickly.
No other places to borrow
If you really need money and you have nowhere else to turn to then a payday loan might be the only answer for you. However, make sure that you really have tried every other option. Try friends and family, credit unions and all of the high street banks and building societies first. It is worth hunting high and low as you may find that there is someone willing to help you and it could save you a significant amount of money.
For short term borrowing
If you only need to borrow some money for a very short term then a payday loan could be an option as you only borrow for a few weeks. However, there are other possible options for short term borrowing such as credit cards, store cards or overdrafts. If you do not have these, then it would be wise to speak to your bank and see whether you can organise them. They could be enough to help you and if you pay them back as soon as you can, then they could be a much cheaper option to. Be sure to compare the costs though.
As a last resort
If you are short of time and do not have time to apply for anything else then a payday loan could seem attractive. They can be settled really quickly as there is no credit check. This can be very useful, but it is worth trying to find the time to look for an alternative if you can.