Success Ladder ? Should You Take Out a Payday Loan?

Let?s face it: times are tough. The powers that be may have announced that the credit crunch is behind us but many people are still feeing the pinch. With prices rising ? even for everyday expenses such as grocery shopping ? many people are finding that the uneasy pause before the next paycheck gets a little more uneasy every time. We?ve all seen the advertisements for payday loans, very short-term loans designed to bridge the gap before payday. Are they ever a good idea?

Shortfall

It?s not unusual to find oneself struggling at the end of the month, particularly if some unexpected expense has reared its head. It?s particularly difficult to cope financially if your credit isn?t in good shape. Many of us have struggled to keep a good credit rating during these uncertain times, as rising costs and tighter credit limits make meeting existing obligations increasingly difficult. You can have a weak credit rating even if you?ve never had a loan or a credit card; this means that as far as credit card companies and banks are concerned, you?re an unknown quantity. Not everyone can simply stroll into their friendly high-street bank and get an overdraft or sign up for a shiny new credit card.

Standard financial advice holds that one should try ?taking a second job? or ?selling items you no longer need?. If neither option is available to you, however, what can you do? On paper, short-term loans of this type tend to be more expensive than conventional loans or credit cards. They can save you money, however, if the alternative is paying hefty bank charges or late fees. If you have pressing but temporary financial needs, a payday loan could be the answer.

Short Term

Although they have something of a poor reputation amongst conventional lenders, payday loans are a lifeline for countless people who would otherwise find themselves in serious financial difficulties. The most important thing to remember is that a payday loan is designed to be a short-term measure and you need to be ready to pay it back in the agreed time period.

For this reason, it?s important only to borrow the minimum that you need and to be certain that you?ll be able to pay everything back comfortably; ?comfortably? means ?in line with your current spending patterns?. Making yourself a hostage to fortune by devising a plan that involves a major change in your habits ? giving up smoking or making some other dramatic change ? can get you into hot water.

Solution

Before you agree to a loan, look carefully at the small print. Be absolutely certain of the amount you?ll need to pay back, how often you?ll need to make payments and how big each payment will be. You also need to go over your financial incomings and outgoings to make sure you?ll be able to pay off your loan. If you miss the deadline and your payday loan is ?rolled over? into a new loan, you could end up paying more than you bargained for.

If you follow these tips, a payday loan can be a convenient and simple solution to a temporary financial problem.

Darren Bechard is an independent finance researcher. He has been following consumer trends with regards to short term finance and reporting his findings on various personal finance blogs. Find out more about Wonga.com short term loans.

Source: http://www.success-ladder.com/should-you-take-out-a-payday-loan/

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