Payday loans offer a quick financial fix for those who need them, particularly helpful when cash is low, and you don’t have the savings to help until your next salary date. Before you go applying for one, it’s a good idea to understand what they are and whether they are the right fit for your circumstances. Here we’ll look at some of the main details about payday loans so that you can make a financially savvy and informed decision before going ahead. Top of Form 

Is A Payday Loan Right For Me? 

Typically used to cover immediate financial needs, a payday loan is a short-term form of borrowing that can be useful when used appropriately. They are usually for lower amounts of money than say a personal loan, with borrowers generally able to apply for up to £1,500, borrowing over a shorter period that can range from a few weeks to a few months. 

Traditionally, this type of loan would be expected to be repaid in full by your next salary date, but now, many payday loan lenders provide more flexibility, helping to make repayments more affordable. This is one of the appeals of payday loans, as well as their accessibility, with online applications quick and easy to complete. This can mean in many situations you can apply and receive the funds the same day, ideal when you need the money quickly. 

Deciding if a payday loan is the right choice for you will depend on your current situation. They can be extremely helpful if you have an unexpected bill to pay that can’t wait until your next salary date, and you have no other options available such as savings or the help of friends and family. Similarly, a financial emergency that springs you by surprise can become much more manageable with the ability to apply quickly for a payday loan. 

Are They Expensive To Borrow? 

When borrowing in the short term, this can be a more expensive way to borrow money, however, this is why payday loans are generally best to apply for only when you really need them. If you have savings to cover a short-term expense, this would be a better option, as with any form of borrowing, you will need to pay interest. The annual percentage rate (APR) will be higher when compared to a personal loan, however, it is important to remember that the maximum repayment terms are generally 3 to 6 months rather than a year or longer.  

When looking at payday loans, many lenders will be transparent with the repayment terms, so you’ll be able to see how much borrowing will cost you before you apply. The Financial Conduct Authority (FCA) introduced a cap on the amount of interest back in 2015, so it cannot exceed 0.8% per day of the amount borrowed, meaning you won’t pay back more than 100% of the amount borrowed in fees and interest.Top of Form 

Should I Use Them In An Emergency? 

If you have no other suitable options, a payday loan can be an affordable way to borrow a small amount of money if you can sustain the repayments. Whereas a personal loan usually will be for £1000 or more and require at least a 12 month repayment term, payday loans can help you borrow smaller amounts over a shorter period. It’s important to choose a lender that is transparent with the loan terms and does not charge any hidden fees, so be sure to compare your options online. This way, you can find a reputable, FCA-authorised lender and choose repayment terms that match your budget. 

Like any loan, you should only borrow for the right circumstances and only if you can afford to do so without putting your finances under strain. If they’re affordable for you and can help you get back on track, there’s no reason not to consider them. 

Author Name and Bio: https://www.cashfloat.co.uk/blog/author/kelly/