It can sometimes be difficult to know whether certain loan types are suitable for certain people or not. Obviously, some loans have specific uses such as a realtor loan but some are more general and can be used for multiple things. This means that if you need a general loan, then you have a lot of choice. You will need to think about what criteria you need in a loan and then match up the one that suits you the best. This means that not all loans will suit everyone and therefore a payday loan will not suit all needs. There are some factors that might be of interest though, when you are choosing whether to use one or not.
How much you can borrow
It is important to understand that a payday loan will lend only small amounts of money. Normally they will be used to lend a few hundred pounds or perhaps a bit more, normally only up to a thousand. This might be significantly less than you can expect from other lenders and means that you will need to think about whether this will be the right amount for you. There are many advantages in not borrowing too much. You will not have to repay for so long and you will not have the loan for so long. It can reduce the stress and burden of borrowing to know that you do not owe that much and that it will be repaid soon. It is worth knowing though, that if you are a first-time borrower of a payday loan, then you may find that you will not be able to borrow that much. The lenders tend to only lend smaller amounts to first time borrowers to reduce their risk. Once you have proven that you can repay a loan on time, then they are likely to lend you more. This will vary between lenders though and so you will need to compare them and see whether there is one that will work for you. It may be that you will need to contact the lenders directly in order to find out.
How repayment works
Repayment works differently on a payday loan to most other loans. You will repay the whole amount that you borrowed plus the interest and any charges in one lump sum. This means that you will be able to clear the whole debt in one go. The repayment will happen on the day that you are paid, by a direct debit that will be set up to make sure that you will have enough money to repay the loan, when it is needed. You will have your salary available to cover the cost of the loan and therefore there is better chance that you will be able to afford it. You will still face fees if you cannot repay the loan, but as long as you borrow a sensible amount, that you know you can afford to repay and are careful with spending; then it should be fine for you.
How borrowers are selected
With most loans you will have to have a credit check and you may even have to show details of your salary to secure a loan. A payday loan does no credit check and so you have no worries about whether you be accepted even if you have a low credit score. You will also not need to show any salary information, although you will have to show that you do get a regular income so that the repayment date can be set up on the day that you are paid.
So, you can see that it is easy to borrow with a payday loan as the selection criteria are very small. This means that loans can suit anyone, regardless of their credit record. The repayment happens quickly, which means that it is great, even for those that do not mind being in debt, it can be great to know that your debt will not last long. The amount that you can borrow will be relatively small compared to other loans. This is great because it means that you will not be able to borrow more than you can afford to repay. However, if you need a large amount of money, you will need to choose an alternative type of loan. You will also have to be confident, that if you borrow a lot of money with the payday loan that you will be able to afford it all in one go. It might be that you would prefer to repay it instalments to make it easier to manage. They may be some payday loans where this can be done, but you will have to hunt for these or you may prefer to choose a different type of loan. It is a very personal decision as to whether a payday loan will suit you. You will need to think about what you are looking or in a loan and then you will be able to see whether the payday loan will fulfil your criteria.