Pay Day Loan Guide

By: James Lowery

Pay day loans offer people the opportunity to borrow a fixed amount of money to cover short term needs. It is then paid back in full on the next pay day, and is intended to provide a one off solution to short term financial issues and is used most often when people need money very quickly. In most cases, rather than having a specific interest rate for the borrowing, lenders will simply charge a fixed fee, which can be relatively expensive.
For most people who need them, pay day loans are needed at the end of the month when they run short of cash. The lending conditions are often quite loose, which means that the finance is open to people who may not be able to use conventional borrowing. Most users treat a pay day loan as a form of emergency borrowing.

Lenders normally make it very simple to arrange the loans.
There are a number of disadvantages with this kind of borrowing, and the main one is that the system is relatively inflexible. If the borrower does not want to incur heavy charges, they need to repay the loan in full very quickly. In some cases, pay day loans can cause problems, as the cost of repaying them means that a person will have even less money to spend the next month, and may need to increase their borrowing. If this is the case, it is advisable to seek specialist debt counselling. The cost of this form of borrowing can be restrictive, and it is important to compare pay day loans in advance of taking one out to ensure that you get the best possible deal.
Pay day loans are aimed at people with an urgent need for cash. In most cases they are available to people who do not fulfil the criteria for more structured borrowing. The loan needs to be repaid quickly and provided this is not a regular occurrence for a person, they will be able to manage their finances.
It is important to remember that having a pay day loan will not normally benefit a person in the long term in respect to improving their credit score on repayment, as it will not normally be paid back over more than a single month. If you need to borrow money in order to improve your credit score, it may be more sensible to choose a different form of borrowing such as a credit card or secured loan.

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