How Do Payday Loans Compare With Other Lending Products?
The lending sector is full of different options that you can potentially choose from when you need to borrow some cash. These range from the quick same day loan that gives you smaller loans that you pay back on your next payday through to larger long term loans. Sometimes, it can be hard to choose the solution that is right for you. Let’s take a look at how payday loans compare with other lending products.
Personal Loans Personal loans come in two variations, secured or unsecured. Secured loans need some form of financial collateral to back them up so these loans are most often used by homeowners. Unsecured loans can be taken out by anybody but often come with higher interest rates as no guarantee/collateral is used here.
Most personal loans, however, will last for at least a year and this solution may not suit you if you only want to borrow a little bit of money and want to pay it back fast to keep your interest charges low. These loans can also take quite a lot of time to arrange so you may not get a quick solution to your cash problems here.
Overdrafts Overdrafts can work well if you only want access to small amounts of cash quickly but they can come with a range of what are, to be honest, often confusing charges and fees even if you have an authorised overdraft.
And, if you get your budgeting wrong and end up using up all of your overdraft then you could also be hit with fees and charges for bounced cheques and rejected direct debits. If this happens then your small ‘loan’ here could end up costing you a lot of money.
Credit Card Cash Advances You can usually use your credit card kind of like a debit card to take money out of a cashpoint as a cash advance. This can give you access to smaller sums of money, quickly and simply.
However, credit card cash advances are charged at higher interest rates than other spending on these kinds of cards. And, if you have a rolling balance on your card that you do not repay in full every month then your costs here can soon veer into expensive territory. Most credit card companies will use your repayments to pay back cash advances last over other spending so the interest that accrues here can soon build up.
Pawnbroking Services You can use a pawnbroker for on the spot cash advances. Here you ‘lay down’ something that you own of value and the pawnbroker will make an agreed cash payment on it. You are then given a repayment date when you need to pay back your loan plus the interest that will be charged.
The drawback here is the fact that you could lose the item that you use to raise cash here if you get into difficulties down the line.
Payday Loans These loans can also give you instant access to small amounts of cash. Most payday loans will offer from £80-750, for example. These loans are income based so you don’t need any security/collateral to get them and they can be arranged online in minutes. Often, you can have the cash that you are borrowing paid into your bank account same day. Then, you simply pay back your payday lender when you next get paid so you’ll have no issues with long term debts.
Payday loans are, however, designed to give you an occasional solution to emergency expenses and cash needs. They should not be relied on as an additional income source or as a lending solution that you use every month.
If you simply need a fast and small cash advance then your cheapest option may well be the payday loan. These cash advance loans are designed to be given and paid back in days or weeks depending on when your next salary cheque is paid into your bank account. And, the fact that they are given with a simple flat fee to cover your interest costs means that you will always know where you stand with this kind of lending option.