Short term loans

When’s the best time to take out short term lending?

Don’t believe the hype: the best time to take out short term loans shouldn’t be for frivolous matters like a night out or to finance a holiday, and here’s why.

It’s all too common to see television adverts for payday advance firms offering short term loans in as little as fifteen minutes, deposited directly to your bank account without even a credit check. The allure of these instant cash loans is great, especially since some less than responsible lenders may try to entice would-be borrowers with dreams of a night out, a shopping trip, or a weekend holiday with the funds, but the truth is that taking out payday loans for anything but financial emergencies can potentially be quite ruinous and could lead to an unsustainable spiral of debt.

Don’t believe the hype

It’s true that taking out payday lending is quite often a very easy and even painless process that is so streamlined that you can oftentimes get an approval back in mere minutes, followed by a sum of money deposited directly into your bank account. However, the ease of access to this cash often hides the fact that these loans carry massive interest rates, sometimes as high as 4,200 per cent in annualised interest or higher, which means that you’re going to have to pay through the nose for the privilege of such quick, easy credit when it comes time to repay the loan in full.

Moreover, payday loan providers also often neglect to make it clear to borrowers what the consequences are for missing your repayment deadline. Late fees for payday loans are often exorbitant, especially because it is standard within the payday lending community to ‘roll over’ a loan that has not been repaid on time, doubling the amount owed and compounding the interest; moreover, it has only been recently that payday lenders have instituted a cap on the number of times a payday loan may be rolled over, so many borrowers have racked up massive, inescapable levels of debt in just a few short months.

So what good are payday loans, then?

It may sound like payday lending is an absolutely horrid idea in any situation but the truth is that there are some very specific instances that taking out a payday loan might actually benefit you, such as an unforeseen financial emergency that occurs at the worst possible moment, such as a week before your next pay cheque. As nothing is more frustrating than knowing you could safely and easily pay for your car to be repaired or an essential household appliance to be replaced in a week but not having the luxury of time, this is where payday loans come into play – and in a very beneficial manner.

If you know that once your next pay cheque comes in you’ll be able to absorb the cost of a payday loan – including the high interest rate that goes along with it – without jeopardising the financial health of your household, this is the perfect time to make use of payday lending. However, this is more or less the only scenario that makes any sort of financial sense, so reserve using this specific type of lending for such an occurrence.