Payday loans are often tipped as an ideal solution to short term cash flow problems but did you know that a personal loan could be equally adept at dealing with such situations?
With personal loans, you'll avoid the sky high interest rates that are charged by payday lenders although the approval process is a little more time consuming and you're credit score is taken into account during the verification.
However, in some quarters, this has failed to deter critics from condemning payday lenders and their practices in luring customers into their sky-high interest percentages.
As with any type of borrowing, it must be stressed that you should only take out credit that you can afford to repay. If you're unemployed or lacking job security then it's not likely you'll be able to pay back the money - unless you ask a friend or family member which is far from ideal and can strain relations. So, what exactly would we use a personal loan for? Here are some examples.
Holidays Taking a holiday with friends or family can be a morale boosting experience although it can also be rather expensive. Taking out a personal loan to cover the cost of the holiday and spends during the trip can be an effective way of affording the getaway.
Credit score Taking out a payday loan can have a negative impact on your credit score - much more than other types of loans. This is only accentuated if you fail to pay back the loan within the specified time limit. This could be something that you could well regret in the future if you're applying for a mortgage as you'll find the rates on offer will be dependent upon your credit score.
Renewal Payday loan companies can often advise that you make a renewal on your credit if you're struggling to repay your debt. This is never a good or productive path to follow. Another loan will only lead to more vigorous debt and the less likely you'll be able to pay it off. However, it is not stated within the payday loan code of conduct that lenders must only charge for late fees for a maximum of 60 days.
Alternatives Because payday loans are typically relatively low in their amounts, it's never inconceivable that you could get the money from another source without putting your credit score or bank balance at risk. How about getting a second job on a part-time basis? Sell some unwanted items? You'll be surprised how some cutbacks in your budget could really improve your bank balance.
With personal loans, you'll avoid the sky high interest rates that are charged by payday lenders although the approval process is a little more time consuming and you're credit score is taken into account during the verification.
However, in some quarters, this has failed to deter critics from condemning payday lenders and their practices in luring customers into their sky-high interest percentages.
As with any type of borrowing, it must be stressed that you should only take out credit that you can afford to repay. If you're unemployed or lacking job security then it's not likely you'll be able to pay back the money - unless you ask a friend or family member which is far from ideal and can strain relations. So, what exactly would we use a personal loan for? Here are some examples.
Holidays Taking a holiday with friends or family can be a morale boosting experience although it can also be rather expensive. Taking out a personal loan to cover the cost of the holiday and spends during the trip can be an effective way of affording the getaway.
Credit score Taking out a payday loan can have a negative impact on your credit score - much more than other types of loans. This is only accentuated if you fail to pay back the loan within the specified time limit. This could be something that you could well regret in the future if you're applying for a mortgage as you'll find the rates on offer will be dependent upon your credit score.
Renewal Payday loan companies can often advise that you make a renewal on your credit if you're struggling to repay your debt. This is never a good or productive path to follow. Another loan will only lead to more vigorous debt and the less likely you'll be able to pay it off. However, it is not stated within the payday loan code of conduct that lenders must only charge for late fees for a maximum of 60 days.
Alternatives Because payday loans are typically relatively low in their amounts, it's never inconceivable that you could get the money from another source without putting your credit score or bank balance at risk. How about getting a second job on a part-time basis? Sell some unwanted items? You'll be surprised how some cutbacks in your budget could really improve your bank balance.
About the Author:
Ian Spence is a freelance writer, online marketer and SEO consultant. Matthew writes for many online publications, as well as developing content and articles for a variety of well-established websites. His latest project is writing informative articles on the subject of Payday Loans and for the reputable online agency "Ferratum UK".
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