Should I Get a Payday Loan This Christmas?
Payday Loan for Christmas
Christmas is traditionally the time of year where finances can be stretched to breaking point. Many people find themselves in a position where they have overspent on presents and festivities, leaving them without the cash to cover vital bills. So is a payday loan the solution?
In terms of getting access to cash quickly, a payday loan offers a pretty decent solution. Most lenders will guarantee that funds will be transferred within 24 hours of acceptance – often even quicker. However, this speed does come at a cost.
Unlike traditional loans where you’ll often have months (if not years) to pay back the balance, a payday loan must be settled the next time you receive your salary. This figure will be inclusive of the loan amount, interest and any other charges. As long as you will be able to cover this outlay in January you will be fine; if not, you might find that you have to take out a second loan to cover your previous costs.
Therefore it is important that you budget thoroughly to ensure that you don‘t get yourself into unnecessary extra debt that could last well into the New Year.
For those who have bad credit or need cash fast, a payday loan might be the only form of borrowing available. In situations where it might impair your Christmas celebrations or mean that you incur excessive bank charges due to exceeding your overdraft, a payday loan can be hugely preferable.
Bank charges are often in excess of payday loan interest rates. So whilst you might be concerned at a 1700% rate of interest, this will often only equate to 25% in real terms. So if you borrow 80 pounds you’ll have to pay back 100. It’s as simple as that. That rate will cover any amount up to the lender‘s maximum level – often between 500 and 1,000 pounds.
If you were to be overdrawn at your bank or miss payments for any standing orders the charges can quickly pile up. With these either charged at a daily rate or a standard one-off fee, both of which could exceed 20 pounds, it can become quite a burden to pay these off.
Bank charges are doubly negative because they will go down on your credit report and could count against your rating for years to come. This can have all sorts of knock on effects, not least making it difficult to obtain finance from loan providers or mortgage lenders. So not only would you be severely out of pocket and receiving a multitude of reminder letters from your bank, but you could also ruin your credit rating.
A payday loan will stop all of this before it even has the chance to happen. You can make sure you have sufficient cash at Christmas, keep your bank happy and avoid unnecessary festive stress. It can also work in your favour when it comes to your credit rating.
Whilst many lenders won’t actually run a credit check on a payday loan (most do as a precaution though), it can still have a beneficial impact on your rating. Because a credit score is based on your reliability as a borrower, each time you successfully complete a payment or pay off a loan, you will see a slight increase. Therefore if you take out a payday loan and pay it back on time without any fuss, this shows lenders that you are responsible.
You should always try to keep control of your finances and watch them closely over the Christmas period. However, if you do come unstuck and need to spread your costs into the New Year, then a payday loan could provide you with a safe solution – particularly if you can’t get access to a standard loan or other finance.
Most lenders are fully regulated so you will be dealing with reputable businesses. They should also give you the full cost of your loan upfront before anything is agreed. Therefore if you’re not happy at any point, you can always get out of it and reconsider your options. So if you’re looking alleviate a little Christmas cash chaos, payday loans might provide the answer.
Vincent Rogers is a freelance writer who writes for a number of UK businesses. For payday loans, he recommends Paydaypower.co.uk