Should You Avoid Payday Loans?

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Payday Loans

When struggling with your finances, it can seem like an impossible challenge to better your finances and see yourself more finically stable, however, it is not impossible. With the use of a short term or payday loan, there is a way to better your financial status. In this article, we will be providing you with insight into whether or not you should avoid a payday loan when faced with a financial emergency. 

What Are Payday Loans?

A payday loan is a short-term loan type that typically lasts between one to three months. This loan type is for smaller amounts than a long-term loan with many lenders only allowing borrowers to borrow anywhere between £100 to £1000. Depending on the amount you are borrowing, this can either be paid back in full at your next payday or spread over a few months with affordable monthly repayments that work for you. 

Finance Options For A Financial Emergency 

Though it may seem like an impossible task to find the finances that you need to get yourself out of a financial emergency it is possible to find the funds that you need. With several options out there such as selling unwanted items or borrowing money from a family member, there are several options you can consider in a financial emergency that can be an alternative to a payday loans UK service and other loans. However, if your family are not in a position to help you or are unable to provide you with the funds fast enough then a payday loan may be the only option for you.

When Should Payday Loans Be Used 

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A payday loan or a loan type of any kind should only be used as a last resort in a financial emergency. When applying for a loan such as this you should only be applying for a loan amount that you can afford to pay back as you will be able to cover the cost of the bills or financial emergency and pay it back with ease on your next payday. By making sure you are looking at the APR and calculating the costs, you can ensure that the loan can be paid back.

Can They Impact Your Credit Score 

As with any loan type, there is always an element of risk to the credit score if you default on payments, therefore, it is important to make sure that you are meeting all your payments every month. Should you miss your payment, you could see the monthly repayment increase due to default payments. However, by paying your loan on time and even increasing the amount that you pay per month, you will be able to pay the loan back in full without seeing any form of negative impact on your credit score at this time. 

With this in mind, there are several elements for you to consider when it comes to applying for a payday loan. Will you be applying for a payday loan when faced with a financial emergency?

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