There may come a time when you’re faced with an expense and you’re not sure how you’re going to pay for it. This could be due to an urgent home or car repair, vet bills, or another charge you had not accounted for. This is where direct lender short-term loans and payday loans can help. If you’re struggling to find the funds to pay for an additional cost, these lenders can provide additional funds when you need them most. Read on as we take a closer look at how to make informed decisions in urgent situations.
What are Payday Loans?
When faced with an emergency expense, payday loans have become a lifeline for many. These loans are small amounts of cash in the form of short-term loans and are typically repaid on the borrower’s next payday. The application process for this type of loan takes place online and can be completed quickly and easily, which is why they can be helpful when dealing with an emergency. Payday loan lenders offer more lenient approval requirements, which means those with bad credit can still benefit.
When applying for a payday loan, you will be asked for proof of income and employment to ensure you can afford to pay back the loan. Your lender will then make a decision – which can take as little as a few hours – you will then see funds in your account as requested.
Making Informed Decisions
Applying for additional finance is a big decision, which is why it helps to know how to approach the application process. Here are a few tips to help you make informed decisions:
Evaluate Your Situation
Firstly, evaluate your situation. How much do you need to borrow to cover your emergency cost? Think about whether there are other ways you can manage this before opting for a loan. Consider any savings you may have or negotiating with creditors. However, if this is not possible, make sure you have a clear idea of how much you need to borrow, and how much you can realistically afford to pay back.
Research Lenders
Before you can apply for a loan, you’ll need to research lenders to decide which suits your budget, and requirements. You can use online tools to help you compare interest rates, terms, and any additional fees. You should also be sure to read reviews and feedback from other borrowers to gauge the level of customer service your prospective lender provides – this is especially important when entering into a financial contract with them.
Consider Terms and Fees
Payday loans come with higher interest rates than other type of personal loans. This is because of the shorter length of the loan term. Take the time to get to know the terms of the loan you’re applying for, including APR which represents the total cost of the loan. By determining how much the loan will cost including interest, fees, and loan amount, you can determine whether you can truly afford it.
Borrowing Responsibly
Before taking out a loan, think about how you can be a responsible borrower, pay off your loan, and improve your credit score. Here are some tips to help:
Only Borrow What You Need
It can be tempting to apply for more than what you really need, but don’t be fooled – this doesn’t just mean you’ll be able to benefit from more money – it means more interest to pay and could result in you struggling to pay it off. Only borrow the cash you need so you can avoid falling further into financial difficulty.
Have a Repayment Plan
When applying for your loan, make sure you set out a repayment plan. This is more difficult with a payday loan as funds need to be repaid in a short period of time but take a look at your budget and determine whether there are unnecessary expenses you could cut and put the cash towards loan repayment, and make sure you prioritise your loan repayment over other non-essential monthly costs.
Seek Financial Counselling
Whilst payday loans can be helpful in an emergency situation if you find yourself relying on them, speaking to a financial adviser could be advantageous. You could also contact money charities that would be more than happy to help you develop a financial plan to manage any debt or cash flow issues you’re struggling with. Don’t be afraid to ask for help if you need it.
Disclosure: This article may contain affiliate links, meaning we could earn a commission if you make a purchase through these links.
