A payday loan is a short term loan where you can borrow a few hundred pounds to pay back when you next get paid. In principle it sounds like a good way to get some emergency cash to keep you going until your next pay day. However, it can be an expensive way to borrow and if you do not manage to pay it back on time, the fees and charges can be very high. These loans tend to be regulated now in most countries, but they can still be more expensive than some alternative options.
Before you take out a payday loan, it is therefore wise to consider whether you have alternative options that could be better. There could be cheaper ways to borrow the money or ways to avoid borrowing at all.
To start with you should decide whether you really need the money. As payday loans were set up to help with emergencies, such as bills that need to be paid or to afford food for the rest of the month, it is easy to assume that this is the sort of thing the loan will be used for. However, you need to consider whether what you need the money for is an emergency or whether it will wait. If you need to pay a bill, then it can be worth checking with the company whether they can wait until you get paid for you to pay it. If you need food, see whether there is anything you can make from your freezer and store cupboard first.
If you have any savings then never borrow money. It is so much cheaper to use your savings than to borrow. You may be saving towards something or like the feeling of having some savings behind you but you will find that it is much more expensive to borrow money than to use your savings to pay for things.
If you really need the money and have no savings then you need to see whether there are cheaper ways to borrow money. You may find that there are quite a few options out there that you could consider. If you work, then you employer may give you an advance on your salary. They may be able to give you bit of money to keep you going until payday. Many large firms are open to this idea and it is worth asking whether it is something you can do. You could borrow from friends and family. Work it out carefully with them, have a written agreement with regards to a repayment plan and make sure that you are both completely happy before you go ahead with it.
If you already have a credit card or authorised overdraft then you may be able to use those instead. If they are already maxed out then speak to the lender and see whether they can extend them. Do be careful though as you will need to pay them back and they can be expensive ways to borrow as well. Work hard to pay them back as quickly as possible, with a credit card, in full if you can so that you do not pay so many fees and so much interest.
If you do not have a means of borrowing like this, then it can be worth applying. Speak to your bank and see whether they can organise anything. You may think that there is no chance that they can help you, but until you have asked them, you will never know. Be careful though, you should only take on a credit card or overdraft if you are confident that you will be able to manage the repayments. A credit card can sometimes make the situation worse. Make sure that you pay the balance off in full at the end of each month and that you keep track of what you are using it for so that you are confident you have enough money to repay it. An overdraft is more expensive and so make sure that you only use it in emergencies as you will start paying charges as soon as you borrow, unlike the credit card when you have until the end of the month to repay.
It is possible to borrow money from a credit union, local welfare assistance scheme or get an interest free loan form a social fund. These may depend on what benefits you get and what is available in your local area. It can be worth finding out about these, by speaking to your local citizens advice bureau.
It is possible to get free advice with regards to financial matters. Look online to find a number and you can discuss your problems with someone who will be able to make you aware of everything that you could possibly do to help. There are many debt management companies out there which may be able to help you, some charge, but there are free ones so look out for them.