Payday loans are short term loans which are designed to help you get through a rough spot. They are usually short term loans over a period of two weeks for a small amount of money. They are meant to be paid back whenever you hit your next payday, hence the name. However, if you can’t pay your loan back you can “roll it over” and the fees will keep accumulating.
Payday loans are intended for emergency situations and are not designed to rely upon for the long run. You even end up paying an annual percentage rate which can be several hundred percent, so it is not a good idea to use a payday loan for a long term period. Also, payday loans should only be used for emergency situations when you have no other option, they should not be used to pay for holidays, shopping sprees, new clothes, electronics or any other luxuries.
If you find that you are relying on payday loans to make ends meet all of the time, you need to take a good look at your budget and consider how you can improve your financial management to help yourself out of this situation. Try to save up an emergency fund which you can use to cover yourself in future emergencies.
However, sometimes a payday loan can be just the thing that you need to get you out of a tight financial situation so that you can get back on track again. They can be a very convenient and quick way to get money in the short term and they usually don’t require any credit history.
What sort of situations might require a payday loan? Here are some examples of when a payday loan might come in handy as a short term financial situation.
Your Car Breaks Down
What would you do if tomorrow you started up your car to drive to work and your engine started rattling and giving off smoke, then suddenly gave up? Unexpected car repairs can put a big dint in your budget and you might require a payday loan to cover the costs so that you can get back on the road again.
Not only do car repairs cost money, but many people rely on their car as their sole means of transport for getting to and from their workplace. This means that if your car has broken down, you can’t get to work and make the money that you need to pay for the repairs! It’s a vicious cycle and in this emergency you might need the loan to get the car repaired so that you can get back to work.
Your Pipes are Leaking
If something goes wrong with the plumbing in your home and you have a leaky pipe, you will want to have the problem fixed as soon as possible. If you wait until you save up enough money, you might find that the leak causes much more damage which will cost even more money to repair.
When you take out a payday loan you will be able to call a plumber and get the problem sorted and then you will have a week or two to make the extra money to pay back to loan.
You Have Overdue Bills
Some people rely on payday loans when they need a little help paying their bills. If your electricity bill comes in and it is much more than you were expecting, you might need a little bit extra to cover the costs. If you are overdue on the bill your electricity will be switched off, so you need to be able to pay this bill on time.
Paying bills late usually has consequences, such as the service being switched off or late fees being charged. Sometimes it might make sense to take out a payday loan so that you can pay the bill and then pay your loan back when your pay cheque comes in.
These are a few situations when a payday loan might come in handy. As long as you use these loans only for emergencies and you pay them back as soon as possible then a payday loan could help you get out of a rough time and back on track.
William Bancs is a financial advisor and helps people make the most of their budget so that they can eliminate money stress in their lives. He writes for PurplePayDay which is a provider of affordable payday loans UK and can advise you on the taking out a loan if you require one.