Payday loans vs regular loans

Thursday, 12/02/2015

When it comes to taking out any loan, it is not a decision to be made lightly. If you borrow money from a lender, you have to know that you will be able to pay it back, in full, by the due date. If you don’t pay back a loan by the date that is set out in your loan agreement, you should be prepared to pay extra interest, have fines added to the amount that you already owe and face legal action.

With a regular loan, you will usually borrow a significant amount of money over a long term, perhaps a period of months or even years. With payday loans, you will usually only borrow this money for a matter of days or weeks, and then pay it back in full when your pay comes in. For this reason, payday loans are easier to handle for many than regular loans, because there is less chance of missing a payment, or having your financial situation change whilst you are still in the middle of loan repayments.

Payday loans are usually only used in emergencies, for example, if your regular pay is late for some reason and you need groceries or to make mortgage payments. They may also be used if something out of the ordinary happens, such as your fridge breaks and needs to be replaced, or you need to pay a vet's bill in the weeks before your payday. Regular loans, however, may be used for more frivolous things, simply because the amount of money is larger, and it is easy to forget the fact that you will be paying the loan off for months or years, simply because this seems a long way away to you.

When you make the decision to take out any loan, you must think carefully about whether or not this is something you can really afford to do. Do you really need the loan? And how are you going to be able to pay it back? Finally, when you apply for a loan, make sure you are working with a reputable lender so that you know the terms of your loan are as you see them.

Payday loans are not suitable for, and would be expensive as, a means of longer term borrowing and are not appropriate if you are in financial difficulty.

Representative 1269.7% APR

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Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk