Things you can use a payday loan for – and things you definitely shouldn’t
A payday loan is a great way to get a small, short-term loan to cover emergency expenses.
The loan offers a quick turnaround and can be in your account within hours, and, under rules put in place by the Financial Conduct Authority (FCA), customers will pay not more than £24 interest per £100 over a 30 day loan period.
With this in mind, there are still good and bad reasons to get a payday loan.
Good: Unexpected bills
When you need cash fast to pay for things that you can’t live without (food, electric, gas etc), or to pay medical or vet bills, a payday loan offers a quick and easy solution.
Bad: Luxury spending
A good rule of thumb for payday loans is to never take one out on something that you can live without.
Although you might desperately want a holiday, a television, or to repair your broken computer, this is the sort of item you are better off saving for, rather than getting yourself into debt.
Good: Switching jobs
If you are moving from one job to another there may be time after your last job ends and before you are paid from the next one where you need cash for your basic needs, such as food and travel.
A payday loan can bridge this gap, and because you know when your next payday is you can budget for paying it back.
With a redundancy, you don’t know when you are going to get paid again, and thus can’t be certain that you’ll be able to pay back the loan in good time. In this situation, it is best to see what benefits are available to you.
Good: Car repairs
One of the most common things payday loans are taken out for is to pay for car repairs before your insurance claim has processed.
Again, you should know when the money will come back for you to repay the loan so there is little to no risk.
Bad: Debt consolidation
There are better types of loans and overdrafts for debt consolidation, as payday loans still have fairly high rates of interest. 0% debt consolidation loans or credit cards should be the first thing you look into.
Good: Deposit on a Home/Flat
You’ve been looking for a place to rent and you come across the perfect flat or home but they need you to act quickly and put down the deposit to secure it now!!! a payday loan, until the end of the month, is a good short term solution to get what you want without a major expense