What is a Payday Loan?
Payday loans are short term loans that can be used to cover temporary cash flow problems if you are struggling financially. In situations where you need money urgently a payday loan can be a quick and easy solution.
However, before agreeing to a payday loan, it is essential that you are aware of all the options available. Some loan providers will charge exorbitant interest rates or impose loan terms that could put you in a worse financial situation than you were before.
What are the options for short-term loans? Below are some tips on how to avoid the traditional ‘payday loan trap’.
If you decide that you need a payday loan it is important to create a budget that sets out how much you will borrow and the amount that you are due to repay. This will help you manage your money throughout your loan period and make it less likely that you will end up in an endless cycle of expensive short term loans.
If you’re not sure how to make a budget, don’t worry – we know financial advisors who provide free clinics on basic budgeting. Get in touch with us to find out more.
Protect your savings
If you need to dip into your savings make a note of the amount you are withdrawing and plan to replace it within a certain timeframe. This will help you cover your immediate expenses without completely depleting your savings. For example, you could plan to pay a small amount into your savings account per month – and increase the sum when you can afford it.
Help is available in a variety of forms, one of which is a debt adviser. If your financial position is precarious, speaking to an expert can help you to identify where changes need to be made. Debt advisers are available online or in person. We recommend that you speak to a not-for-profit adviser if possible, as, not only are they unlikely to request further meetings (to make more money from you), by paying them their lower cost, you will be saving money whilst you obtain advice.