There may come a time in your life when you’re faced with an emergency that you cannot afford to pay for. This could be anything from urgent vets or medical bills to a broken-down car or home repairs, and you may not know where to turn. This is where payday loans UK can help. If you’re struggling to make your income stretch further, they can provide you with the help you need. And with easy application and loans for bad credit, you’ll have access to funds when you need them most.
If you struggle to pay back your loan, you could end up falling into the debt trap. Read on as we take a closer look at how to avoid this below.
What are payday loans?
Just as the name suggests, payday loans are a type of finance that can help tide you over until payday. If you’re struggling to make ends meet, or you’re faced with an emergency expense, applying for a payday loan means you could have access to additional funds to help. These loans tend to be paid back over a short period of time, typically on the borrower’s next payday. Because of this, payday loan lenders only offer small amounts to make the debt easier to pay off. Whilst payday loans can be incredibly helpful as a short-term option when you’re faced with an unprecedented expense and nowhere else to turn, they come with higher interest rates, and if you’re not sure of the total cost of borrowing, you could end up in a debt cycle.
A debt cycle is a term used to describe your finances when you can’t afford to pay off a loan, so you take out another loan to pay it, and the same continues to happen, leaving you with debt mounting up that you may struggle to control. If you’re thinking about taking out a payday loan, it’s essential that you don’t fall into the debt trap. We’ll look at a few tips to help you avoid this below.
Create a Budget
This is the best place to start when avoiding the debt trap. When you’ve taken out a loan, make sure you create a budget so that you can be sure you have enough to cover the costs of repayment. Look at your payments each month and create priorities. Priority payments will include your mortgage or rent, transport, energy bills, and debt payments. This way, you can be sure you set aside enough money each month to pay back what you owe. If you’re going to struggle to pay your primary expenses, look at areas in which you could cut back, and put the money saved towards it.
Consider Alternatives
When you’re faced with an emergency and don’t have the cash to pay for it, you’ll panic. But before you apply for a quick and easy payday loan, think about whether you could get funds elsewhere. Think about whether you could borrow from friends or family to reduce the interest payments and avoid debt altogether. You could think about taking out a credit card, as some of these have better interest rates than short-term loans. Before deciding, weigh up your options to avoid debt.
Read the Terms and Conditions
This is essential. Payday loans are easy to apply for online, but you need to make sure that you know the true cost of borrowing – which isn’t likely to be stated in the advertisement. Pay attention to the terms and conditions, read the small print, and ensure that you know how much interest you’ll be charged during your repayment period and any other charges on top of this that may make your loan more expensive and therefore harder to manage.
Make Payments on Time
It’s crucial that you make your loan repayments on time to avoid facing further interest charges and additional fees. This will contribute to making the loan more expensive and you’ll be more likely to fall into the debt cycle. Making payments on time means you will not only be able to pay your debt off in full more quickly, but it also means you will be able to build your credit score which will benefit you in the future.