These days, it seems impossible to turn on the television without seeing an advert for payday loans, or to walk down the High Street without passing a shop offering all kinds of seemingly attractive short term loans and similar offers. Understandably in the current economic climate, such deals can be enticing. However, you should make sure that you really need such a loan before taking one out.
In a difficult financial situation, the benefits of a payday loan are obvious. They can usually be taken out extremely quickly, and can help to solve an immediate cashflow crisis caused by an unexpected bill or sudden emergency. Whether you have miscalculated your outgoing expenses for a particular month, or need to pay the plumbers to fix a disastrous leak, the need for short term finance can be obvious.
However, there is a price to paid for such convenience. Such short term loans tend to have extremely high interest rates attached, to make up for the risk of lending without the kind of security expected by traditional banking institutions. There can also be very significant additional fees if you do not repay the loan on time. Unless you are careful, a simple payday loan can spiral into a very significant financial burden.
It is important, therefore, to ask yourself whether you really need that loan. If you wait until your next paycheque, will you suffer severe consequences, or will you simply have to wait a few days for something which is ultimately a luxury? Whilst it can be tempting to take out a short term loan to be able to afford that weekend away, or the latest gadget, you are ultimately going to end up paying a high price in interest for doing so. If you find yourself unable to afford the things you want to buy, you should take a more long term look at your financial situation and how it can be improved.
Even if you really do need to spend before your next paycheque, you may not need to take out a loan. For example, have you asked your friends and family for a zero interest loan, to be repaid over the next week or two? Have you contacted your bank to see if any overdraft can simply be extended? Even if this incurs some charges, these are likely to be much less than those attached to a payday loan.