Can you really afford that payday loan?
You should be asking yourself that question if you are considering to apply for a payday loan. Let’s take a look at a real life example.
If you find yourself short of £275 today, you may decide to take out a payday loan. You must keep in mind that payday loans typically have a repayment term of one month. The idea being that you will repay the loan on your next payday. So in one month you will have to repay the loan plus interest and costs.
You need to ask yourself, if you will really be able to come up with the original loan amount of £275, plus interest and costs of £82.36 with is a total of £357.36 in 28 days from now.
That means it is going to cost you a massive £82.36 to borrow £275 for 28 days. This example is based on the example shown on PaydayUK’s website.
This is extract is from the website of a popular payday lender, PaydayUK:
Representative Example: £275 borrowed for 28 days. Annual interest rate of 359.40% (Fixed). Total amount payable by one repayment is £357.36. 6310% APR Representative.
Considering the huge number of people who are struggling to replay their payday loans, many people didn’t ask that all important question, can I really afford that payday loan? Or perhaps they simply over estimated their ability to repay their loan.
Never take out one loan to pay off another. That is the quickest way to a huge debt problem.
In conclusion, if you are considering to take out a payday loan. Ask yourself can you really afford that payday loan. You should have a clear plan as to where you are going to get the money from to repay the loan. Don’t ever take out a loan on the hope that somehow you will get sufficient money to repay it. More often than not, if you are short of money this month, next month will not be much different.