How To Use Payday Loans Responsibly

Payday loans are a reality whether you're in the US or the UK. It is estimated that over a million UK households will at any given time have a payday loan of some kind. Learning to manage a budget and plan the responsible use of payday loans is important to having the ability to payback the loan. Sometimes it feels once you need a payday loan, you are already in the midst of quicksand and sinking fast.

We spoke with a number of companies about the ways the you can help yourself get back straight after needing some short term finance.

Budget

Most people use the payday loan as quick moan for emergencies. The car breaks down, the heating dies; the oven quits working and so on. There are so many reasons that can add up and eat at the dwindling funds of most families.

One of the best ways to combat financial crunches and to plan for the responsibility or need of a payday loan is to set up a family budget. This is where you discover all the funds coming and how each bit is spent within your family. How much of your income goes to mortgage, rent, bills, and groceries is outlined in your budget. The miscellaneous expenses are where you can outline the savings that are available to you.

Understanding The Business

One very important aspect to personal and social responsibility with payday loans is the understanding of how the business works. While different countries may have different rules for repayment and rates for loans, basically they are the same.

However, you must remember that there are a number of fundamental differences from one product to another:

• Loan term
• Loan amounts
• Early repayment possibilities
• Eligibility criteria

In order to ensure there are no surprises, dig into one of the licensed sites comparing UK payday lenders that compiles a complete range of information to give you all the facts you need as well as some additional tips and borrowing guides.

The Financial Detail

The payday loan is an unsecure type of credit that is a short-term personal loan based on future income rather than credit. With certain exceptions, the principal cannot exceed £1500 with the maximum usually 50% of the anticipated paycheck.

There are usually fees based on a fixed percentage of the principal but this is only part of the fees you will pay. You will also pay two types of interest, the annual percentage rate (APR) and the effective annual rate (EAR). Rollovers and extensions are common with payday loans. This is where most people start to get into trouble as the compounded principal, fees, and interest continue to add up.

Educate Yourself

Before you borrow, take the time to educate yourself on how payday loans work. Know the process and know the company you will use. Try to work so that you will not get yourself or your family into financial trouble. Do your best to use a company that is responsible and accountable to the social role of payday loans.

Your obligation will depend on your understanding of how to borrow and how to repay what you borrowed. Your options might seem limited when you are in an economic crisis, but explore what is available to you.

Pay It Back!

After budgeting and educating yourself, stand by your commitment and pay back your payday loan. Avoid the rollovers and extensions. Do you your best to payback your principal, fees, and interest immediately so that you do not find yourself in a deep hole. Payday loans can be helpful but do not let them turn into a hindrance for you and yours.

Useful Links

Money Advice - moneyadviceservice.org.uk

Citizens Advice - Budgeting - citizensadvice.org.uk