In situations where you are stressed out over money and simply don’t have the money to pay your bills or an unforeseen circumstance, you may feel trapped. One option that many people contemplate in circumstances like this is a short term or payday loan. The opportunity to get money you need in a hurry is extremely appealing and under certain circumstances it could be a good option for a lot of people. But how do you know if a Payday loan is the correct choice for you?
Can you afford it?
The first thing you should ask yourself is “Can I afford to repay it?” If the answer is no, then you might want to avoid getting a short term loan. The main reason being that if you cannot afford to repay the loan you will find yourself in even more debt which essentially digs you into a deeper hole. You have to break the circle of getting into debt over and over again in order to get back on your feet financially.
Short term and payday loans should only be used as a short term financial solution and not a long term way of managing your finances. If you are borrowing money to make repayments on other loans and debts, you may be in a vicious circle and it might not be the best thing to do.
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How is Your Credit?
If your credit history is not good and you have a report ripe with missed payments, defaults, and late payments then the chances of you getting approved for a loan from a bank, other traditional loans or a low APR credit card are unlikely. Credit cards can also be a very expensive way of borrowing money, if you only pay back the minimum repayment per month. To see how expensive credit card debt can be click here.
For this reason, short term loans are an option for people with poor credit. Also, successfully paying off your short term loan can help you start to rebuild your credit history which is a big bonus. Guarantor loans and borrowing money from friends of family are also avenues that are worth exploring.
Is it an emergency?
What exactly will you be using the short term loan for? Do you simply want some new shoes or a new dress to go out in? Or do you need to pay your rent to avoid getting evicted? Short term loans should really only be used in case of an emergency. Using them for shopping or other things that aren’t necessity can have a similar effect as abusing credit cards. You will find yourself in pools of debt that you cannot afford to pay back. So make sure you are seeking the loan for a necessity rather than just something you want.
Payday and short term loans are one potential option for people in need of a loan to cover an unforeseen expense or emergency. But an application needs to be taken seriously and all avenues of credit, borrowing and budging should be explored before you make a decision.