Warning: Late repayment can cause you serious money problems

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Representative APR

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People tend to fall into two camps when it comes to personal finances. They are either savers or spenders. If you get a little bonus at work or a windfall on the lottery, most people will either put it straight in the bank, ready for a rainy day or they will head into town for a spot of retail therapy. The problem with spenders is that they often spend more money than they have. Once they’ve set off on a spending spree, they don’t stop even when the money runs out. Those are the people who turn to a pay day loan to cover their financial shortcomings. They’ll often apply for a short-term loan convinced that once they get paid, they can pay back the money. Sadly that can be a very difficult path to stay on. If that sounds like you and think you’re a spender but want to be a saver, then the good news is that you don’t have to be stuck in one camp looking desperately at the other.

When people think about saving, most will think only in terms of large amounts. Putting away the majority of your wages just to see the balance on their savings account rise quickly can be a fool’s errand. Naturally, it’s a great feeling to see your bank balance  go up and up, but there is a danger that you will leave yourself short. Not only short of money but short of a life. If you’re saving too much money too quickly, then your social life can suffer. Savers become so concerned with putting money away for a rainy day that they don’t even notice when the sun is shining. So what’s the alternative?

Let’s say you’re a spender. There’s nothing wrong with that, but if you find yourself relying on a pay day loan to cover the shortfall then that can be a problem. The pay day loan companies are masters at making applying for their loans a breeze. Borrow a little and pay it back on pay day. What could be simpler? Well saving a small amount every week could be…and it is! By saving a little every week, you won’t get the instant satisfaction that saving large amounts will give you, but that’s not really the point. We all know saying “time flies” and this works in your favour, even if you’re only putting away £1, £2 or £5 a week. By saving even relatively small amounts regularly, you will be amazed just how soon it adds up.

Putting money aside is the best way to save for large purchases like cars, holidays or even a wedding. It also helps to cover you for life’s more unexpected twists and turns. It’s often these surprise events, which let’s face it aren’t usually nice things, which push people towards taking out pay day loans. Major problems with your car or calamitous home repairs are the sort of events that have people going online for that quick fix loan. We all know quick fixes rarely lead lead to long-term solutions, so having some money tucked away can not only help keep your finances on track, it can also be incredibly gratifying to know you’re resolved the problem without resorting to pay day loans and their astronomical interest rates.

Savings can protect you from unforeseen car or house problems but occasionally problems are ever bigger than that. If the worst comes to the worst and you lose your job, become seriously ill or even disabled by an accident then having some financial protection will be an enormous comfort. There are, of course, state benefits available for this but these take time to apply for and even longer for the money to come through. During that time, having some degree of financial stability will mean an incredibly difficult time will be made a little easier.  Those regular small payments will make a huge difference.

Let’s not forget, using pay day loans or even credit cards to pay for items will cost you much more money in the long run, than the item would by buying it in cash today. Once the interest charges are applied the cost just keeps on rising. Even reasonable APR interest rates can work out at around 20-30%, so that £100 pair of boots you’ve fallen in love with could end up costing you £130. If you saved £5 a week you could have them in just 20 weeks and who knows, you might even end up getting them in a sale; you’re already saving money on your savings! As a saver you turn the tables on interest rates. Instead of being a victim to them, they become your friend as you start to earn money from them. The more you save, you more you earn.

For some people a pay day loan doesn’t cause any problems, but the risk is always there that it might. One missed or late payment can cause serious financial problems. However organised you think you are, forgetting just one repayment could be the start of a downward spiral of debt it can be very difficult to escape from. Save yourself the hassle by saving just a little bit of money every week. Whether you want a pair of boots or a new car with a big boot, there’s something incredibly satisfying about saving for it yourself. Knowing that you’ve worked hard and saved hard to buy the things you want is a great feeling. If you’ve never experienced it, try it.

If you’re wanting to move from being a big spender to a big saver, there are a few things to remember. Make sure the account you use to save with allows for instant access to your money. No-one wants to have to wait 28 days (or more) to their money when they need it now, that’s when a pay day loan really becomes appealing and we all know where that can lead! Also, before you open an account do some research into interest rates. These can vary wildly between companies so look for the best deals available, as many are often only open to new customers. Whichever you choose, enjoy the process of saving. Don’t look it at as a chore, you’ll be happy you did it in the long run.