When you're feeling strapped for cash, simply affording everyday things can be a real struggle. And with the cost of everyday living set to get higher, staying afloat is becoming an impossible task for many.
When your bank balance is preceded by a minus sign, and your next paycheque seems years away, how can you feed your family? Is the answer to scrimp, save, and live on a shoestring? Homeowners everywhere are left feeling like there is nowhere else to turn.
The truth is we shouldn't have to feel backed into a corner. There are plenty of ways you can boost your bank balance in the short term. One of the most popular - if not controversial - ways is with a payday loan.
Are Payday Loans the Answer?
This type of loan lets you borrow small amounts of money over 30 days. You just pay the lender back on your next payday. They have however, been met with some pretty harsh words by the media. So are they the answer, or will they make a tough situation even worse?
Here is the hidden truth about payday loans. Three things the press never told you:
1. APR isn't Scary
The first thing you'll notice about these cash advances is the seemingly high APR (annual percentage rate). Figures like 2,000% might look scary, but there is a reason they're like this. You're only borrowing the money for a maximum of 31 days. The APR applied to your loan is relative to this time period.
Mortgages taken out over 20 years for example, spread your repayments over a longer period. With a short term loan, the APR is larger to counter this. Pay your broker back early, and your interest rates are lower. Different lenders also offer different rates, so be sure to shop around.
2. Credit Boosting
Everyone knows that failing to meet loan repayments, direct debits bouncing, and a huge over draft can leave our credit ratings a little poor. While missing the repayments on this kind of loan can damage your credit rating, they can have the reverse effect.
If you pay the lender back before your final date, you may be giving your credit rating a little boost. You shouldn't rely on this as a way to increase it though. There is no guarantee you'll improve your rating, so you should see payday loans as a quick fix.
3. Relative Risk
You'll have read the horror stories about cash advances. People being met with huge repayments they can't meet. Homeowners being forced to take out another loan just to cover the cost. The truth is no loan is risk free.
As long as you meet the repayments, and only borrow what you know you can pay back, you should have little trouble. Borrowing money from any lender carries risks; you just need to know them, and be sensible with your loans.
Payday cash advances get a rough ride in the press. It is understandable why people have concerns, but they need to be looked at objectively. If you need instant cash for an emergency, they're the ideal solution. Only of course, if you know you can pay them back.
Can't wait until pay day? Discover what choices are open to you right here.