If you are considering getting a payday loan, then you may wonder when the best time is for you to take one out. It is good to understand that with this sort of loan you will usually pay a bit more because the lender takes more risk and so it is best to try to only take one out if you really need it. This high risk is because they will not do a credit check. You will also normally have to repay the loan in one lump sum and so you need to be aware of the costs of this. There are other things that you can do to reduce the cost or the risk of costs going up if you miss the repayment.
- When there are no alternatives – as a payday loan tends to be dearer compared to some other ways of borrowing it is always wise to look at alternatives first. You will need to take a look at what other options there are available for the amount of money that you need. It is most likely that a credit card or overdraft will be the alternatives and if you have access to these then they could work out cheaper. You will need to investigate this though as if you have a large unauthorised overdraft for a significant period of time or choose to only repay the minimum on a credit card, they could work out dearer than a payday loan and you will have the stress of being in debt hanging over you for much longer.
- Take it out as late as possible – With a payday loan you will repay it on the day that you get paid. So, the closer to your payday that you take it out the shorter the term of the loan. If the term is shorter then the interest will be lower and so this will save you money. So, the closer to your payday that you take out the loan, the cheaper it will be, so take it out as close to your next payday as possible. You may feel that you cannot delay, but think about whether you really need the money that quickly or not.
- Ensure you will be able to repay it – you need to also find out how much you will be expected to repay on the loan. If the amount is too high and you know that you will not be able to afford to repay it, then it is not the right time to take out the loan. You need to be confident that you can repay it as if you cannot, you will have additional fees and charges which could be significant and make the loan very expensive. Consider how you will manage the repayment and whether you need to borrow less money or not borrow anything at all. If you think it will be okay if you cannot repay it then look at the fees that you will be charged in this circumstance and you may change your mind.
- Make sure you can cover other costs too – it is also wise to make sure that you will be able to cover your other costs as well. You will have other commitments each month that you will have to pay such as your utility bills and rent. You will need to make sure that even when you have repaid the loan, that you will be able to afford these as well. Therefore, you will need to take a look at your checking account statement and find out what these payments are so that you can calculate whether you will have enough money.
- For emergencies only – payday loans are designed to help out in emergencies and that is why they can be arranged so quickly. This does mean that you should decide whether what you are using them for really is an emergency. If you can wait for the money then take the opportunity to save up for it instead and you will find that you will pay out significantly less compared to borrowing the money.
It is also worth thinking about your personal circumstances. Consider whether your job and income are guaranteed and so whether you will have the money available to pay the loan. Make sure that you do not have any other big costs coming up that you need to pay for in the following month. Consider whether you will put any family members at risk if you get into financial trouble. Borrowing is a big decision and it can have impacts that we do not always consider when taking out a loan. So as well as considering whether it is the right time to get a loan we should also consider whether getting a loan at all is the right thing for us.