How to avoid payday loans

Posted bySophie Knight | Category Blog | Date 08 December 2017

It is that time of year again when christmas is just around the corner and people are begging to feel a squeeze on their wallets due to the pressures of gift giving, travel and food costs that are all associated with the christmas period.

Some people get so worried about this that they opt to take out a payday loan, which will give you quick and easy access to the money as you need it. Payday loans are often sold as a quick fix, but need to be handled with caution as they can lead you in more debt potentially, even more so then you were in the first place.

To decide if a payday loan is what is right for you, or if it is not the right option for you. Don’t fret if it turns out it isn’t the right option for you, as we have put together a list of other options available if you are in a tough financial situation.


What is a payday loan?

A payday loan in the United Kingdom is also referred to as a short-term loan uk. With a payday loan, you are going to find that the cost is significantly higher than on a credit card or increasing the credit on an arranged overdraft. The interest rates can be so high that even if you pay back the money within the agreed repayment period, it will still cost you a lot more to give back than you asked for.

The eligibility for a payday loan is a lot easier to qualify for than a credit card, if you have a bad credit score for example. If you have a bad credit score, you may be turned down for a credit card, but it is likely you will still be granted a loan from a payday company. Although payday loans are easier to access, the costs can get completely out of control. Because of this, payday loans should really only be for emergencies.

Considering getting a short term loan?

To many people, a payday/short-term loan is seen as a last resort because of the debt it may result in. There are a few reasons by which we believe taking out a loan may be the wrong option for you. These include using a short-term loan for:

  • Paying a mortgage or rent

  • Outstanding household bills

  • Paying off other debts

  • Paying for luxury items, going out, new things etc.

  • Paying off another payday loan

Alternatives to payday loans

credit-cards

A credit card

Using a credit card may be a better option as it is a longer-term solution. However, do not fall into a trap! Make sure you only spend as much as you can afford to repay, otherwise, this can end up a costly affair when it comes to repayments.

An overdraft

You can speak to your bank to agree on a temporary increase on an overdraft. This can be a useful way to get in some money without building up a considerable amount of debt. Nevertheless, be sure that you don’t end up in an unplanned overdraft, as you may have to pay high fees for using one.