Some people do get worried about how easy it will be to repay loans. It is something that it is well worth considering hen you are thinking about taking out a loan though. You do need to think about how you will be expected to repay and whether this is something that you will be […]
Some people do get worried about how easy it will be to repay loans. It is something that it is well worth considering hen you are thinking about taking out a loan though. You do need to think about how you will be expected to repay and whether this is something that you will be able to manage. Often it is short-term loans that get singled out as being hard to repay but this is not always the case. However, it is worth knowing what the repayment expectations are so that you can then work out whether this will suit you.
How are short term loans repaid?
With a short-term loan you will normally be expected to repay it in one lump sum and fairly quickly too. This might initially seem tricky, but it is set up so that it should be manageable. Firstly, the repayment date is set up to be on the day that you are paid. This means that you should have the money available to pay it as your pay would have just appeared in your bank account. As long as you make sure that you provide the lender with the right date and you are really sure that you will be paid that day, then this should be a great advantage for you. The repayment is also set up by direct debit which means that you will not have to remember to repay the loan but it will happen automatically. This means that you will avoid forgetting about the repayment and having to pay a fee for being late for it. There are some types of short-term loan where you can repay in instalments. These are preferred by some people who feel that would make it much easier for them to manage the repayments. If you borrow a larger amount of money then this could certainly be the case, However, some people prefer to know that the loan will not hang around for very long and that they will clear it really quickly.
How much could I afford to repay?
It is worth working out how much you think that you would be able to repay. You might be able to make a guess, but it is much better to actually do some calculations to work this out. If you get copies of previous bank statements; perhaps for the last few months, you will be able to see what bills you have to pay and how much money you have coming in. You should be able to use this information to calculate how much you will have left over that you will be able to use to make loan repayments. It might be that you will identify places where you are spending more money than necessary that you will need to cut down on so that you will have extra available money for repaying.
Will a short-term loan work for me?
Once you have looked at how much money you would be able to afford to repay and what loans are available you will be in a better position to work out whether they will be right for you. You will need to find out how much you will need to repay for the loan and then you can calculate what you can afford. You should find that lenders will have calculators on their websites where you can enter in details of how much you need to borrow and how long for and you will find out how much you will need to repay. This is very useful and you will be able to easily and quickly see whether the loan will work for you as you can use the research you did of your own financial situation to work out how much you can afford to repay. As touched on above, if you really need the loan then it might be possible for you to make some changes so that you can afford it even if you feel that normally you would not be able to. It may be possible to change your spending so that you either by cheaper items or less items and free up some money for the repayment. You may also be able to earn more money, perhaps doing some freelance work, selling things you own or similar things so that you are able to get a bit of extra money that you will be able to use towards repaying the loan. Do make sure that you have a plan in place before taking the loan though. If you leave it until you have the loan to start thinking, it might be too late to do anything because the loan needs to be repaid very quickly, often in just a few days or weeks so you will have limited time.
There is sometimes some confusion about different types of loans and one area can be what payday loans can be used for. It is worth understanding more about them and then you will be able to decide whether they might be the right choice for you if you are in the situation where you are considering one.
Are there restrictions on what a Payday loan is for?
There are some loans where the money borrowed has to be used for specific purposes. This can include things like student loans and mortgages where you are expected to spend the money on course fees or a home. However, there are also loans where there is no specified purpose. A payday loan is like this in that the money does not have to pay for something specific and you will not even be asked what you are spending the money on. As with all loans, it is wise to think carefully about what you are spending the loan on and whether you feel it is worth it. It can be really wise to calculate how much the loan will cost you and then decide whether you feel that the item you are buying is worth this. Remember that the costs of the loan are effectively costs of you having that item and you have to decide whether you would have bought that item had it had a price tag of that much money. Many people would feel happy with that but it is good to check.
How much can be borrowed?
How much you can borrow with this sort of loan will partly depend on the lender. However, you will often find that the amount available tends to be hundreds of pounds and normally not more than a thousand. This means that they are really only good for cheaper purchases. It will ultimately be down to the lender as to how much they will let you borrow. They will normally lend small amounts of money to first time borrowers and if they can prove that they are able to repay the loan, then they are likely to lend them larger amounts. They tend to use this approach rather than using a credit record as guide, which is what mainstream lenders tend to do. This means that if you do have a poor credit record, you will be able to borrow money from them even if you are not able to do so using other lenders.
How do repayments work?
It is wise to understand how repayments of a payday loan work as it may influence your decision as to whether they are the right loan for your specific purchase. Payday loans were set up to help people manage until they next got paid. This means that they will only lend money for a short amount of time. You will given the money and expected to repay it plus interest when you are next paid. This can be really handy as the loan does not last long so you are not in debt for long. However, it does mean that you have a lot of money to repay at once which might be hard for some people to afford. If you were hoping to borrow money for a longer period of time, then you might find that there are loans which suit you better such as an instalment loan or guarantor loan.
So, although there are no official restrictions on what you can buy with a payday loan, you may find that you are restricted due to the amount that you can borrow and the way that the loans work. They can suit some people really well but it will depend on exactly what you need to money for, how much you can afford to repay and much the item you are buying with it costs, as to whether it will be the right loan for you. The fact that payday loans are often given to those with a poor credit record can be in your advantage though and may open up your borrowing options. It is wise to look into all the different types of loan so that you are aware of what they can offer you. You will then be in a position to work out which will fit your criteria the best. Then you will be able to compare the lenders that provide that types of loan and you will be able to decide which of those looks like it will be able to provide you with the best value for money. It will take some time but if you borrow money regularly it will be well worth it as you will be able to use the knowledge over and over again. It will also help you in the short term as you will find a loan that suits your needs well and hopefully you will not pay more than necessary for it either.