Financial experts recommend saving for a ‘rainy day’ to ensure you have funds to cover emergency expenses. However, if you rely on your entire weekly or monthly take-home pay to pay for expenses, then there’s little chance you’ll have any left to spare for such an occasion. Should an emergency arise, then having easy and quick access to short-term finance is important. Payday loans are, in many instances, an ideal solution to get the cash that you need but to make an informed decision if this is the right choice for you, you’ll need to consider the following critical factors before you pick up the phone. Here’s what you need to consider before finalising your decision.

Understand The Role A Payday Loan Has To Play

Payday loans fit into the short-term finance category and as such, should be accessed only when necessary. You’ll find that the interest rate applicable will be relatively higher than other types of finance and you should be prepared to pay back the full financed amount when due – any defaults on repayment and the loan becomes significantly more expensive. It’s important to remember that this type of loan is not a revolving credit facility, and any additional funds needed will require you to apply for a new loan.

Calculate how much you REALLY need

Another part of deciding whether this is the right course for you is to calculate the exact amount of money that you’ll require. Borrowing more money than you need will push up the figure you’ll have to pay back.

Can You Afford The Monthly Repayment Instalments?

It’s inadvisable to apply for a payday loan that you can’t afford. Knowing in advance the finance amount, interest rate and length of repayment terms you can afford will help you in deciding whether you’ll be able to afford to repay the loan. To ensure that you still have funds for other financial commitments, you can ask the lender to increase the length of repayment term which will lower the monthly repayments, but you’ll be committed to making these repayments for a much longer period.

Have You Chosen A Regulated Credit Provider?

How do you avoid being victimised by unscrupulous money lenders? You do due diligence to ensure that you only borrow from regulated financial institutions. A regulated credit loan company will be bound by a professional and ethical code of conduct. This makes it less likely that you’ll be taken by surprise and discover you’re responsible for ‘hidden fees’ or have to pay punitive penalty fees should you default on a repayment.

Having a complete understanding of the nature of payday loans and their mandatory terms and conditions is critical before accepting this type of short-term finance. Should you have any questions about any similar finance product, please don’t hesitate to contact Acorn Finance for advice.