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When your rent is due in a week and you have bills to pay on top of that, a payday loan can come as a last resort especially in financial difficulties.
But do you know what to consider before applying for a payday loan? As soon as you jump onto your laptop, you will be instantly bombarded by thousands of short term payday loan websites – by this point; you are already overwhelmed by the outgoings due at the end of this week.
The fact is that all the fancy jargon on these payday sites is confusing and they all seem to be offering you; the best rates, prices and deals.
5 steps to take before applying for a payday loan
With just one week left to get your finances in order, you suddenly realise that, you have no idea what you are actually looking for.
Have no fear; being able to pay back should be your top priority and not letting the worry of repayments take root in your every day life.
With our foresight, you will soon have the confidence and knowledge to find what’s right for you. Below are 5 things you should do before applying for a payday loan.
#1]. Plan the payday loan repayments
Make sure you are aware when your repayments start – this may seem obvious – but it’s easy over the course of a working month, to let something that you don’t normally rely on, to slip your mind.
Most short-term lenders will have you paying back in monthly intervals. So, you should probably make a plan of what specific luxuries you can cut back on to account for your additional outgoings.
Different lenders provide you with different ways to repay the money back; some lenders offer you a couple of choices and the first choice is; setting up a direct debit – this is the most common type of repayment method, but there are others.
Alternatively, another option is to set up a direct debit authorisation – whereby regular withdrawals will be made on a set date – which can sometimes be a better choice as you can keep your debit notes for your own record; in case of an error or dispute in any given payment.
A standard direct debit will take out your funds automatically; this makes it harder to track debit notes and can often mean you get footed with the transaction fees, which can lead to the inability to initiate, future direct debits.
#2]. Compare and shop around for better payday loan offers
Don’t jump on the first cute looking site you find – these gimmicky characters can be distracting when you are trying to get the full picture – don’t get fooled by cuddly old folk!
Comparing the various APR’s of different websites is valuable – sometimes you get a marginally lower APR that, seems great, but one that has significantly higher monthly repayments.
Be cautious when you find a really low APR and make sure you understand that you will be making monthly repayments, plus the interest.
#3]. Always remember payday loan is a short-term lending
Remember short-term lending is not a long-term financial solution – for every £100 borrowed you will pay back around £25, plus interest.
But if you borrow responsibly from lenders and plan your repayments, there is no foreseeable reason why you will become reliant on them.
Therefore, be aware that payday loan is never a long-term financial solution but rather, it is a small cash loan to get you through some financial difficulties. If you want a long-term loan, it’s advisable to contact your bank or a reputable loan company.
#4]. Payday loan management tools
So you have found a good website that has some decent rates and manageable repayments. You should now try to find out if they offer you more than just good rates.
Are you being offered online budget tools to aid your repayments and help plan your monthly budget? If not, why borrow from a company that is unwilling to help manage your extra outgoings?
The main goal you should keep in mind should be to find a payday loan company that gives you free advice and information on the management and repayment of your loan.
Anything extra lenders offer you, like interactive tools, a budget calculator or an interactive financial planner, will be a huge bonus if you are not comfortable with your finances.
#5]. Budget accordingly
Once you are happy with your choice, the final stage of planning begins. Your monthly outgoings are crucial from here on in – be sure to set up a spreadsheet or find financial tools, if the company you go with provides them to you, it’s budget town for the next month and time to start thinking about your spending.
If you normally buy mainstream brands – and if you are like me and have a vice for Yorkshire tea – it’s time to say hello to super market own brands! Don’t be despondent about this, based on experience you may actually find that you like certain cheaper brands and best of all, you save money when you brand swap.
You may enjoy a fine red wine with some cheese on the weekend, but that’s no go for the next month; no luxury items allowed – become disciplined at doing this and you will reap the rewards.
Try to pose yourself questions; what else do you enjoy that you could do without this month? If its spring time and you still have the heating on, you may want to consider putting an extra layer of clothing on instead, to save on household bills.
Could you somehow streamline your morning bathroom schedule, as the less water you use this month, will mean more money at the end of the month.
Short-term loans are not a long-term financial solution
It’s important to re-stress that short-term loans are not a long-term financial solution – if you are worried about making your repayments; get in contact with your lender and give them a heads up before the month comes to an end.
In most cases, you should be able to get an extension; if you have stuck to your budget and been fiscally smart there is no reason why you should have additional expenses on top of your loan.
Always seek advice and keep all parties involved, in the loop, one of the most common mistakes we see is that; people leave it until a few days before their repayment is due, to announce that they cannot make it – communicating effectively with your lender and keeping your budget on track will be crucial in successfully repaying your loan.