There’s always the potential to make mistakes when you decide to borrow money. No matter whether you’re seeking finance from a bank, a credit union or a short-term credit provider, if you fail to meet your repayments, then penalties can occur. While seeking help from a credit provider is a simple, effective way to plug a brief financial gap, it’s always worth being aware of any payday loan mistakes beforehand. Here’s what you shouldn’t do when embarking on short-term finance.
#1 Payday Loan Mistake: Taking Out A Loan To Pay Another Loan
If you already have a loan or other debts and you are having trouble keeping up with the repayments, it’s not a good idea to turn to a payday loan company, or any other lender in an attempt to borrow your way out of the problem. This will just lead to more debt, more repayments and more problems. Seek out financial advice instead from an organisation such as the money advice service.
#2 Payday Loan Blunder: Having No Repayment Plan
Before you take out any other sort of credit, you must be aware of where your cash flow is coming from and when it is going to arrive. Not knowing when you will next have money, but taking out a loan anyway can lead to higher levels of debt. Ensure that you will know how and when you can pay back the money borrowed, and the interest that will be accrued, before taking the loan.
#3 Payday Loan Oversight: Borrowing More Than You Need
UK Payday loans are there for short-term emergencies or sudden financial shortfalls. You should only borrow enough to cover these eventualities, rather than relying on them as a source of general finance. Just take what you need for your current situation and be aware of how much you’ll be able to repay. Taking more than you require will just mean additional repayments in the future.
#4 Biggest Payday Loan Error: Not Doing Your Research
As well as looking around to seek out the most competitive rates (and the payday lender that’s right for you), make sure that you have looked into any alternative sources of finance before embarking on any sort of loan. Whether you are borrowing money from a credit card company, a bank or a payday loan firm, there will always be interest on your loans and penalties for late payment. It’s worth considering whether you can get assistance from friends or family, or sell some things you no longer need. Make sure you have investigated all your money options and have picked the right course of action for you.
#5 Mistake: Borrowing for Someone Else
Obviously, we applaud your generous nature and we all want to help out friends and family if they are in financial trouble. However, if you are approached by a friend who has been rejected by loan firms and wants you to acquire the money for them, consider the repercussions very carefully. Ultimately it will be your credit rating which is affected if they fail to provide you with the money to repay on time, so it’s generally best to avoid doing this – even if you know your friend has the best of intentions.
When you are looking to borrow money for whatever reason, you can often error in your decision making. To avoid these mistakes, it is important to ensure you have explored all fo the options available to you, before making your final choice.
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