It is undeniable that payday loans have received a lot of
bad press over the last few years. But this is arguably down to a small number
of unethical businesses pushing the boundaries of financial legislation in
pursuit of profiteering from occasionally desperate individuals.
Of course, payday loans are not always the best option when
you are looking to secure financial support, but they can be a good option in
several situations.
In this article, we walk you through four situations where a
payday loan DOES make financial sense.
When you need the
money quickly
Sometimes unexpected bills or expenses can catch us by
surprise. Although it is always a good idea to put away a little money for a
‘rainy day’, for many this isn’t achievable, or the expense far outweighs the
emergency money you have been able to put aside.
Although all options should be considered, you can take out a payday loan to
cover these unforeseen and essential expenses in the short term until you have
earned the money you need to pay it back.
When you only need to
borrow a small amount
Due to the short term and speedy nature of a payday loan, interest
is often high. For this reason, it is best to only take one out when you need a
small about of money for a short time.
By borrowing only the amount which is essential you ensure
that you are not paying unneeded interest. When you are borrowing larger amounts,
it is always preferable to secure more favourable interest rates through other
means such as a bank loan or credit card.
When you can pay it
off on time, in full
You can easily get caught out with payday loans if you do
not have the resource to pay it back in full (plus the interest) in the agreed
period. Although you will rarely have the cash to pay off the loan upfront,
ensuring that you are guaranteed the resource to pay it back will limit the
risk of getting caught with additional charges.
Failing to make the payments is likely
to damage your credit score.
When other options
are not available to you
For those with a poor or limited credit history, payday
loans may be the only way to secure funding when it is needed. Using this type
of service could also be a good way to improve your credit score, but only when
you make the agreed payments to the agreed deadlines.
Even if payday loans are your only option, it is critical to
only use them if you can make the payments, as failure to do so will likely
result in further damage to your credit history.
Payday loans are not always the answer when you
need to get hold of cash. However, there are some situations where taking out a
payday loan can make financial sense. Understanding how much you will be
expected to pay back and when you need to pay it by will help you decide
whether a payday loan is the best option for you.
