While we all do our best to save money and cover our expenses each month, life has a nasty habit of throwing surprises our way. These can often be costly and leave you wondering where the money will come from to cover them! One way that more and more people are choosing to deal with these nasty surprises is by taking out payday loans. But what are they and what can you use them for?
What is a payday loan?
Before you can even think about applying for a payday loan, you need to understand what one is. You should never sign-up for anything in life without fully understanding it – this is especially true for any financial products. In simple terms, a payday loan is an amount of money that you borrow from a lender to cover unexpected costs or emergencies. They are usually over a short-term and not for huge amounts.
Payday loans are normally unsecured also which means you do not have to put up any assets you have as collateral. The terms ‘payday loan’ comes from the fact that the money borrowed is designed to keep you going until your next payday. Any money you borrow in this way is paid back each month in accordance with the conditions of your loan agreement.
How do I apply for a payday loan?
Most people now will choose to apply for a loan like this online. There are lots of reputable payday loan providers on the internet now for you to apply too. It is vital though to do your research first and only apply to a professional company who has a reputation for being honest, fair and trustworthy. Looking up online reviews and talking to friends who might have used a payday loan company before are great tips here. You could also contact any loan company you were thinking of using before signing up. This allows you to see how easy these are to get hold of and how knowledgeable their staff sound. It is also crucial to look at the terms and conditions any company attaches to their loans.
When you have found the company you wish to apply to, it is usually pretty easy. It normally involves filling in an online application form via their website for the amount you need. This will include giving them your personal details which is why finding an honest and reputable lender is so important. They will then consider your application and let you know if you have been successful. The time it takes for the money to be in your bank account if your application is accepted can vary but sometimes it can be within a few hours.
It is also important to understand the difference between a direct lender a a loan broker before you apply for a loan with either. The reason for this is that there are benefits to both direct lenders and loan brokers.
What can I use a payday loan for?
Payday loans can be used for a number of things. In general terms, they are mostly designed to cover you against unplanned emergencies or things you need to pay for which you cannot afford right now. A classic example is a household appliance like your boiler or washing machine breaking down overnight. You need to fix it but what happens if you do not have any spare money in your account until next payday? The answer is that you take out a small, short-term payday loan to cover it which you can then repay in affordable monthly payments going forward.
Other examples of situations where loans like this come in handy are your car breaking down, the laptop you need for work dying or your smartphone needing replacing. If anything like this happens when money is tight, a payday loan could be the answer.
Will a payday loan affect my credit score?
We now live in an age when everyone knows how key their credit score is. This is a rating which lenders use when deciding if they should let you borrow money or how risky it is to lend money to you. A good credit score sees you able to borrow money more easily and usually for larger amounts at better rates. But will taking out a payday loan affect yours?
As long as you keep up with your monthly repayments and pay back all the money in full and as planned, then it will not affect your credit score negatively. While any kind of borrowing like this will show up on your credit record, it should not have an adverse effect if you pay the loan off as planned.
Payday loans can be useful for many things
The original question asked in this piece was what payday loans can be used for. As the above shows, they can actually come in very handy across a wide range of situations in normal life. If you only need a small amount for a short period of time, they are ideal and a better choice than larger loans from a bank. Of course, it is key to know what payday loans are all about before signing up for one – hopefully this article has helped a little.