If you are not familiar with a payday loan, then you may not
be sure how one works. If you do need some extra money for groceries you may
wonder whether the loan might be the answer that you are looking for. It is
worth finding out more about how the loan works and then you will be able to
decide whether it is the right thing for you.
What can Payday Loans be used for?
For some loans the uses are restricted which means that you can only use them for certain things. This applies to things like mortgages which are strictly for real estate purchases. However, there are many loans where you can purchase anything you wish with the money that you get. A payday loan is like this in that that you are not restricted in what you can buy with it. However, it is sensible to make sure that it will give you enough money. A payday loan will normally be for up to £1,000 which should be enough to buy groceries. However, a payday lender may not be prepared to lend very much to a first-time borrower. This is because they will not know if they are likely to be able to repay on time. In order to reduce their risk, they will probably want to just lend a few hundred pounds to start with. This might still be enough money, but it is wise to check with the lender before applying in order to see how much they are likely to give you.
Will I be eligible for one?
With many loans there are a lot of conditions which have to be fulfilled in order for you to qualify. One of the most important is normally that you have to pass a credit check. This can be a concern for those that have a poor credit score. Not only will they know that there will be a risk they will be turned down for a loan due to having a poor credit score but they might also have a worse credit score as a result because every time you are turned down for a loan it is noted on your credit report. Therefore, this can be a big worry. However, with a payday loan no credit check is done. The loans were actually designed to help those with a poor credit score, so that they could have the opportunity to borrow money if they needed to. There are very few other criteria that you will need in order to be accepted for a payday loan except that you cannot be a minor, need to be a US resident, have a checking account and a regular income. Most people would fit this and so it is very likely that most people would be eligible to get the loan.
Should I use one?
It is important to think about whether the loan will suit your purpose and whether it is right for you. It is wise to think about a number of factors so that you can decide. The cost is an important factor, as it will be wise to decide whether you think that it is worth paying the extra cost of the loan to get the groceries that you need. If it means that otherwise you will not eat, then you could feel that it will definitely be worth it. It is sensible to make sure that you will be able to repay the loan though. Payday loans are repaid quickly on your next pay day. This means that you will have to come up with a lump sum to repay it. This can be tricky for some, but if you make sure that you do not borrow too much and that you are careful with your spending, it should be fine. It is just important to make sure that you are confident that you can repay it before you take out the loan.
So, it is quite acceptable to use a payday loan to buy your
groceries. You will need to make sure that you qualify for the loan, but most
people will. You will also need to make sure that you will be able to borrow
the amount of money that you need. Most importantly you will need to make sure
that you can repay the loan. The loan can be very suitable for buying something
like this as you can borrow comparatively small amount compared with other
types of loan and you can get the money really quickly. It might even be
possible to get the money within a few hours and you will be able to get on
with your grocery shopping really quickly. This can be extremely important if
you want to make sure that you get the groceries that you need really quickly.
If you are trying to decide between short-term loans, you
may wonder whether payday loans are the best choice. They certainly tend to be one
of the more well-known short-term loans. It is worth making sure that you
understand how they work so that you can decide whether they will suit you.
How you get the money
With a payday loan you will apply for the loan online or by telephone in most cases. The application process is very simple and you will not have to provide that much information. This means that it can be very quick and easy compared with other loans. You do not need to have any collateral or a credit check which means that a lot of people are able to get this type of loan if they want one. Once you complete the simple application process you will be able to find out very quickly if you have been approved for the loan and how much you will be offered. Payday lenders will normally lend up to £1,000 and they may offer less to first time borrowers. This is because they will want to check whether you can repay a smaller amount before they allow you to have a larger one.
Once you and they agree on a loan, they will transfer the
money into your checking account. The whole process can be completed within a
few hours for some lenders. This means that you can get the money really
quickly. If you need the money in an emergency then this can be ideal. It is
wise though, to check with lenders to find out how long they might take as this
time will vary. You will also need to make sure that you will be able to borrow
the amount that you need.
How you repay
Repayment on a payday loan is really straightforward. You just repay it all in a lump sum when you are next paid. This means that you only have the loan for a few weeks. This can be particularly good for anyone that does not like being in debt as they will clear the debt really quickly. In fact, most people would probably like to clear their debts quickly. As the repayment date falls on your payday it means that you will have the money available to repay the loan, as long as you borrow a reasonable amount of money. A direct debit is set up as well, which means that you do not have to think about the repayment, it will just happen automatically. You will need to make sure that there is enough money in the account to cover the payment though. Make sure that you are aware of how much money will be leaving the account and how much you will be paid. Check whether there will be any other payments coming out on that day and whether you will have enough money to pay. Also be sure that you will definitely be paid on that day. If there is any chance that you pay might be later, then change the payment day to a few days later so that you can be confident that there will be enough money available to pay the bill.
How much it costs
A payday loan will often have both a fee and interest charge. It can be hard to work out the exact cost which is why many lenders will have a calculator on their website where you will be able to work it out. The cost will vary between lenders and you should be able to calculate the cost on different lenders sites so you can compare them. The more money you borrow and the longer you borrow it for; the more expensive the loan will be. Therefore, if you can delay borrowing as long as possible and borrow the very minimum that you need, you will be able to keep the costs down. If you do not repay on time you will also face extra fees, therefore another way to keep the costs down is to make sure that you do repay it on time. You can do this by making sure that you know when the repayment needs to be made and how much it is and ensuring you have enough money available to pay. This might mean that you will need to find a way to earn a bit extra or that you will need to reduce spending elsewhere to afford it. It can be really wise to actually write out the figures and work out whether you will be able to afford it or not. You should be able to tell whether you will easily be able to afford it, whether you will need to take care or whether you will need to take proactive action to make sure you can afford it.