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Pay day loan

Pay day loan has received bad press because of its high interest rates, but if you use this credit source responsibly, it can have a definite upside. There is no denying the fact that these interest rates can be dangerous if not repaid on time. Previously in teh industry there have been a lot of lenders who are not trustworthy and use a lot of different kinds of malpractices to strip customers of their hard-earned money. However, if you are a customer with a genuine emergency or in need of some immediate cash to pay off a bill or other emergency, a pay day loan may be the answer to all your needs. There are times when you cannot anticipate a financial calamity, and borrowing money from a friend or a relative is not always an option. This has created a class of people who, in many ways, were being ignored because they do not match the criteria of institutions offering mainstream lines of credit. Now, these people have access to forms of credit that are not provided by other sectors.

There has been a lot of criticism against the lenders for these types of loans, which makes it important to talk about how you as a customer should behave in a responsible manner.  Customers should initiate sound actions now, and not wait for a state of turmoil resulting in authorities imposing strict regulations.

  • Most of the large reputed companies have very clearly imply that these loans are to be used only in a state of emergency. This is a fact that you should be informed about.  Before praising the easy access of these loans, it is better to scrutinize your expenses and see whether you will be in a position to repay the loan.
  • Most importantly, it is essential to consider your actual need for a pay day loan. Some people use it as an additional source of income on a regular basis, which is not what these loans are meant for. If we can start behaving responsibly towards our financial needs, there will be no need for such strict regulations to come into place.
  • Statistics reveal that most of us have savings less than £500. This is not the ideal way of living. When you have a family to take care of, relying on savings in the case of an emergency is a much better alternative than payday loans.
  • Thoroughly researching the lender you choose before taking a pay day loan is a must. That way you will know the cost and also exactly what is expected of you. Keeping up-to-date with the developments in the world of short term lending can be an asset.
  • The Roll over option that some lenders offer is a tempting one.  However, if you cannot pay back the loan during the allotted amount of time, this will result in a higher accumulated interest charge.  Overall you will be paying a much higher sum that what you expected. To prevent this, budget your expenses for the month, keeping aside the amount needed to pay back the loan. This may seem difficult in the beginning, but it will build confidence and give you peace of mind.
  • For those of you who can afford it, it is not a bad idea to talk to someone who can give free, impartial advice. The Money Advice Service is one such organisation who can take you through budgeting your expenses and guide you to financial stability. This can help get you in the habit of being responsible with your money.

So while regulations have changed and the lenders are required to be 'responsible lenders', we should not overlook the borrowers should be responsible too.

Overall View:

As this article proves, it is imperative to understand that you are responsible for your finances and no one can take control of this except for you. It is essential to understand the consequences of your actions and take ownership. Make sure that you only apply for a pay day loan if it is very urgent and you have no other way to go, because these loans can either make or break your financial condition. So act as an informed borrower, wisely.