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When are Payday Loans a Good Option?

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It doesn’t matter if you make decent money at the moment or you’re living pay check to pay check, at some point in life most people will experience at least some degree of financial hardship. Whether it’s a short-term issue or a more lasting hardship, money woes are something pretty much anyone can relate to.

You will find all different kinds of statistics out there that break down people’s financial situations, but it seems as though feeling “chronically broke” has become the new normal here in the UK. In fact, as much as 70% of the working population in the UK report that they are chronically broke.

While there are all different ways to deal with a lack of funds, from finding a new job, to getting a second job and cutting back on living expenses, these are more long-term solutions. When you’re in need of money fast, payday loans are often what people turn to. But do these make sense? When is a payday loan a good option for you? Let’s take a closer look.

What is a Payday Loan?

In case you’ve never had experience with a payday loan, it’s a good idea to first familiarise yourself with what it is. This is a loan that tends to be for a relatively small amount, which you pay interest on, and pay back within a short period of time. It differs from a personal loan in the repayment time frame, a payday loan is much shorter, and the approval process is extremely fast so you can have cash in your hands quickly.

Common Situations Where It Makes Sense

So, when does this kind of loan make sense? Because payday loans from lenders like LoanPig are meant to be paid back quickly, this is only meant as a short-term solution. LoanPig offers loans of £50-£1500, but they need to be paid back in anywhere from one to 12 months. With a traditional loan, you’d have a much longer timeframe, so you need to be sure your finances are such that you can repay the loan quickly.

This style of loan also offers a much smaller amount than a traditional loan, so they are meant for things like:

  • An emergency bill such as your car breaking down where you don’t have an emergency fund saved
  • Helping you to cover the cost of a home repair or renovation job
  • A small medical expense that you aren’t covered for
  • To pay for an upcoming vacation, and so forth.

The idea is that you need the money now, and you cannot wait until your next pay day to come up with the cash yourself.

When a Payday Loan Shouldn’t be Used

Are there any situations where a payday loan shouldn’t be used? The answer is yes. If you have consistent issues with money, and constantly find yourself short each month, this isn’t the right solution. If you can’t pay back the amount borrowed within a short timeframe, it’s also a bad idea. These aren’t meant to be a permanent solution, but rather a one-time short-term solution.

By using payday loans responsibly, you’ll be sure to keep yourself out of financial trouble.

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