If you are picking between different loans, then you may feel rather daunted. It is very difficult to understand how all of them work and which one might be the best for you. Payday loans can be a particular problem as they are quite different to many other types of loan so there is a lot to learn about how they work. You may also not have used one before because they are fairly new. Therefore, it is worth learning more about how they work so that you can decide whether they will suit your needs. Some of the main features are explained below:
- No credit check – if you have a poor credit rating then it could be that the payday loan will be one option open to you. They do no credit check and so they could be an option. It is worth considering it because if you apply for a loan and are turned down then you will have this noted on your credit report and it will put off other lenders from lending to you. With a payday loan you will not be turned down if you have a poor credit rating and so you will not have this risk.
- Quick to arrange – a payday loan can be arranged very quickly. This means that they are suitable for emergency use. So, if you need money extremely quickly, they will be suitable for you. You will need to check between lenders to see how quick they will actually be. Some will get money to you within a few hours and the slowest will normally take nothing more than a few days. This means that you need not worry about it taking too long. Many other loans can take weeks to arrange and therefore a payday loan can be significantly shorter.
- Borrow small amounts – you will only be able to borrow up to £1,000 with a payday loan. This can be really helpful as it means that you cannot borrow more than you can afford to repay. You can borrow smaller amounts than this so you need only have the money that you really need. With some other types of loan you are offered much higher amounts and it means that you can be tempted to take more than you need spend it and they pay the charges of borrowing and take a long time to repay. By only borrowing a small amount, it will be much easier to manage the repayment.
- One lump sum repayment – by just having one repayment it means that you will not be in debt for long. You will repay the whole of the loan on your next pay day. This means that you will clear the whole debt in one go on the day when you have the most money available to do so. This will allow you to be out of debt quickly and no longer have to worry about owing money. This is quite different to many loans, where you will repay in instalments over a long time. If you do not like being in debt, then it could be a really good alternative for you.
How do I decide?
The best way to decide what type of loan is best for you is to note down what your requirements are. Think about how much you want to borrow how soon you need the money, what your credit rating is like, how long you want to repay it over and how much you can afford and then you will be able to work out what sort of loan matches up with your needs. It is good to spend the time working this out and then researching loans as it will make a big difference. If you are able to find out exactly what you need, you will then be able to match it with the loan that suits you the best. This will enable you to have the best possible borrowing experience. Remember to compare lenders though, as you will need to find the loan with the best value for money. Comparing them on cost is important but you also want to look at other things as well. Consider whether you trust that lender, whether they have a good customer service and whether the repayment schedule suits you or not.
It is worth taking some time to make this decision. You will need to make sure that you have researched thoroughly so that you can make the best decision. It is important as it could make a big difference to how much you pay and how easy it will be to repay. You could even get someone to help you with the task to make it easier and they might be able to help you make the decision more easily than if you are doing it on your own.