Should I use Payday Loans?

It can be difficult to know whether you should use payday loans. In fact, it should be the case that whenever we borrow money we questions whether we should go ahead with that borrowing. It is not always an easy decision because there is often emotion tied in with the decision. It can be easy to focus on what we will do with the money and how that will help us, without thinking too much about the risks that we are taking on. It is really important to think through some key questions though before we take on any loan, including a payday loan.

Do I Really Need the Money?

The first thing to ask yourself is whether you really need the money. Think about what you will be using the loan for and whether you really need that item. It might be that it is something that you will be able to go without. If you cannot go without it then think about whether you can wait and save up for it. It might even be that case that you have some savings already that you could use to buy it or put towards it. It is much cheaper to use savings to buy things than it is to borrow money and so it is wise to try to do this if you can. Saving up for something can also be really satisfying. You can feel proud that you worked hard to get the item and you will appreciate it much more as well. It can be hard to spend savings as it is often difficult to save up the money or we like having some savings to fall back on. However, saving is a much cheaper way to get things than borrowing so make sure that you bear that in mind.

Can I Justify the Expense?

It is also a good idea to ask yourself whether you can justify the expense of the loan. Find out from the lender how much they will charge you for the loan and then think about whether you think that is good value for money. Consider what you are buying with the loan and whether you still think that it is worth it considering that extra cost that you will have to pay as well on top of the cost of the item that you are buying.

Can I Afford to Repay it?

It is so important to make sure that you can repay the loan. It is a question that is really the first one that you should ask. Find out from the lender how much it will cost you to start with. They will be able to let you know easily. You might think that you know how much it will cost you or you might try to guess. Do not do this, make sure that you have an accurate figure because you will need to make sure that you calculate properly, whether you will be able to afford to repay it. Then you will be able to look at how much money you have coming in each month and think about whether that will be enough to pay for the loan. Also, you will need to think about the other things that you will need to pay for as well as the loan. You may have other commitments such as other bad credit loans to repay, utilities, insurance, rent etc to pay and you will also need to buy food and toiletries and other essentials. Make sure that you work out how much all of these will cost you and then you will be able to properly calculate whether you will be able to afford to repay the loan.

Will Having Overdrafts help me?

It can be worth thinking about different loan types and whether they might be useful for you to have, knowing how they work and how much the cost will help you to be able to make a decision more easily if you do decide that you need to borrow money. You may feel that perhaps having an overdraft facility available to you could be really helpful, but it is a good idea to think about the advantages and disadvantages of this before you get one and then you will be sure that the decision that you are making is the right one.

Pros of an Overdraft

Having an overdraft facility means that you will have money available to you if you need it. You will be able to use it if you have an emergency and do not have enough money to pay for it. You will also be able to use it if you need a little extra money for something, even if it is not an emergency if you wish. It can feel good to know that you will have this money available to you if you need it.

Cons of an Overdraft

An overdraft is an expensive way to borrow compared to some other ways of borrowing. This means that it might not be the best option for you to take. It is always worth thinking about all of the types of loans and which will suit you the best. It may be worth paying more for some types of borrowing but you will need to make sure that you feel that it will give you good value for money.

Having an overdraft facility means that you will always have this money available for you to use if you want to. It can be tempting to therefore use it even if you do not have an emergency situation. If you just fancy a treat and you think that you deserve it, then you might use the overdraft money to pay for it, even if you know you really shouldn’t. Some people will tend to know that they wouldn’t do this as it just isn’t the sort of thing they are tempted to do. However, some people will know that they are very likely to do this. If this is the case with you, then it could be a good idea to avoid taking out the overdraft as you may just find that it is tempting for you.

It is also important to make sure that you repay the overdraft. As an overdraft does not have a repayment schedule it is important to make sure that you do repay it. It will be repaid automatically when money goes into your account, but if there is not enough to repay it all then you will still owe some. It may also be a while until you do have money going in and so interest will keep adding up. You may even find that you will be tempted to avoid having money paid into that account so that you can spend the money rather than repay the overdraft. Some people do this and open a second current account to run their transactions through and just leave the other with the overdraft outstanding in it. This can mean that they will keep paying interest on that overdraft for a long time. It can be too easy to ignore and just pay without thinking about what else you could be doing with that money. It can feel much easier to just pay the interest than contemplate repaying the debt itself which might feel like a daunting prospect. However, it is worth remembering that you can repay it in parts and so you will not need to find all of the money in one go.

Are There Disadvantages of Zero Interest Credit Cards?

A zero interest credit card sounds really good. Being able to use the card to buy whatever you wish and knowing that you will be able to have the money without paying any interest can seem extremely tempting and you may wonder why everyone doesn’t have a card like this. There are some disadvantages and risks to having a card like this though. It is worth being aware of these and then you will be able to make a decision as to whether they will be the rights ort of card for you or whether you should look at other types,

Zero Interest Period Will not last Forever

The first thing to note is that the zero interest period on the card will not last forever. It is normally just for a set amount of time and then it will change to a variable rate. This means that you need to be aware that after a while you will start to be charged interest. You will not have the money available to you to borrow for free, forever.

Card Will Need to be Repaid

The credit card will need to be repaid at some point. This might sound obvious to some people, but there will be some that will not even think about the repayment. They may even think that it I free money that they can spend. People might even use the card as an excuse to treat themselves to lots of new things that they would not normally be able to afford and think that they will be okay because there is no interest to pay. They might even think of it as free money.  However, it is not and the money does not belong to the card holder and therefore will need to be repaid at some point and it is important to bear that in mind and think about how you will manage to repay it before you start spending money.

Minimum Payments Have to be Made

It is also worth noting that you will normally still have to make minimum payments on the card each month. Although these will not be large amounts of money, it could be the case that you will need to make sure that you allow for them and set a budget so that you can afford them. Make sure that you are therefore aware of how much they will be and then you will be able to check to see whether you will be able to afford them.

When Zero Interest Period Ends Interest Rates Could be High

The zero interest period could only last for around six months and then there will be interest payable on the card. This means that you will then need to start paying interest if you have an outstanding balance on the card when you receive your statement. You could find that the interest rate is a lot higher than you might expect. This is because the interest is often set at a higher rate to make up for that fact that you have not paid interest for a while. If you can afford to repay the whole outstanding balance just before you start paying interest then you take advantage of this sort of card. You might also be able to do a balance transfer to a different card which might have zero interest or lower interest. However, you need to be aware of what you need to do before taking out the card and think about whether you think that it is a good idea to take one out or whether you think that it will be too risky.

Are Overdrafts a Good Thing?

There are some people that are not at all keen on overdrafts and there are others that think that they are good. It is not surprising that people have different opinions on it all as we often differ in our opinions on a lot of things. However, it is worth making sure, that whatever your opinion might be, that you have weighed it up carefully It can be tempting just have the same opinion as people we know or form an opinion based on just a few things. It is therefore worth being aware of how overdrafts work, how much they cost and what the alternatives are before you make up your mind.

How do Overdrafts Work?

Overdrafts are a very specific way of borrowing money. They are tied to a current account and you will be offered a certain amount of money that you will be able to borrow. It is available for you when you need it, but as soon as you start borrowing you will be charged interest on it. The interest rates will vary between banks but they are generally 35% – 40%. The overdraft has no specific repayment plan because as soon as you pay money into your bank account it will automatically repay the overdraft. Most people have a salary, benefits or other payments going into their bank accounts regularly and therefore it will be paid off. However, there are some people that will have an overdraft with an account that they do not pay money into and just leave it sitting there for a long time and accumulating interest on it.

How Much do they Cost?

The interest rate tends to be 35% to 40%. This does not mean a lot unless you compare it to the rates of other types of borrowing. So, it a good idea to be aware of what you bank is charging for other things which you can generally look up on their website. This will help you to understand how much this is and whether it is expensive or not. It is generally the case that credit cards might be cheaper but there could be some dearer ones and personal loans tend to be cheaper but you often have to borrow more as a minimum. A shirt term loan or no credit check loan will tend to be dearer. 

Alternatives

It is well worth comparing the prices of different loans and thinking about what your alternatives might be. It is wise to start by thinking about whether you really need to borrow money at all or whether you would be better off just going without the item. If you still want it, then consider whether you can wait for it and save up as this would be cheaper than borrowing. You may already have some savings you could use or put towards it. If you do decide to borrow, then you will need to find out about all of the types of loans that are available and consider which will fit your needs the closest. It is worth thinking about the cost but also about the value for money that you get. Once you decide on a loan type, then it can be a good idea to compare all of the lenders that offer this type of loan and see which of those look the best. You will probably find that there are plenty to choose from. This means that there is a good chance that you will be able to find one that suits your needs really well, whether that might be an overdraft or a different type of loan that you have decided will work best for you.

Should I do all my Banking in one Place?

It can be very tempting to do all of your banking in one place. This is because it is extremely convenient as you will only have to visit one branch or login to one website etc. However, there are also advantages in banking in more than one place. It is worth knowing what these are and then you can decide whether you think that it is a good idea to stick with the same bank or not.

  • Interest Rates Might be More Competitive – it is worth thinking about the interest rates on the products that you have and how they compare to other banks. It is possible that you will have savings and loans and therefore will be paying and receiving interest. These interest rates tend to vary between banks as well as between products and it is a good idea to check regularly to see how the rates that you have compare with other banks. There could be a big difference and you may find that you are paying much more than necessary for you loans or getting far less interest paid on your savings than you could if you went elsewhere.
  • Costs Might be Lower – when you have a loan, there may be costs as well as interest and you may also pay for a current account and it could be the case that if you choose a different bank, those costs will be less. So, make sure that you think about this when you are comparing banks as the costs are not always that obvious.
  • There Might be a Larger Range of Products – it might be the case that some banks have a wider range of products to choose form than others. This means that when you need a product, perhaps a savings account or loan, that you will have more choice. Having more choice means that you are more likely to find a product that is closest to what you specifically need.
  • Customer Service Might be Better – it can be a worry that if you go to a different bank you will not get the level of customer service that you are getting with your current one. However, you will also have the possibility of getting a better customer service with an alternative bank. It is difficult to tell unless you read reviews or even contact the customer service department yourself and see what they are like to deal with.
  • They Might be More Convenient to Use – it could be the case that you will find that other banks are more convenient to use than yours. They might have better online banking facilities, better phone banking or a better branch system. It can be worth thinking about how you want to use your bank and whether you are happy with what they provide for you.

So, you can see that there are many reasons (and these are just some of them) why it might not be a good idea to do all of your banking in one place. Of course, it might be that you are with the perfect bank, but you will never know until you compare with what others are providing. This means that it is wise to regularly check what is going on with other banks and you will be able to then think about whether you are happy with the bank that you are with or whether you want to consider changing to another bank. It is worth remembering that you will not have to switch completely but you could change across some of your products if you want better places for them.