Payday loans are typically used for emergencies or household expenses – with their short term nature, you use the money to pay off your emergency and then you can repay quickly once you receive your income from work.
The attraction of payday loans is when you find yourself in a particular situation, you can gain access to money quickly at a relatively low-interest rate (dependant on your credit score).
In this guide, we are going to be looking at some of the most common reasons why people chose to take out and/or reply on payday loans.
Bad Credit
You may think that it would be best to avoid a payday loan if you had a history of bad credit. However, many people believe that by taking out a payday loan from a reputable lender in order to settle debts can be a good option for some.
Banks only usually provide loans to those who have a good credit history. Payday companies are not so exclusive as banks. Payday bad credit provides loans to those who have both good and bad credit scores.
People should really be spending time trying to fix their credit rating and paying off personal debt, but this is easier said than done. In that case, many people look to payday loans to save the day.
Cancelling out Debt
Many of those who take out a payday loan package are doing so in order to pay off previous debt. The loan may be used to pay off a loan from another lender, a credit card bill, or a more personal loan to a friend or family member.
If you already have outstanding debt, it can make sense to some to take out a payday loan in order to take care of them before, particularly, if the amount of the interest which will be on the loan is less than what the individual owes on the debt they are trying to pay off with the loan.
Avoiding Embarrassment
Some people cannot think of a worse scenario then admitting to their friends or family that they need financial support. Using a lender is far more discreet and you do not have disclose it to anyone if you do not wish to.
While a family member or a friend may not charge you interest, money can be a touchy subject and it may result in friction. This is why people would rather seek out a loan with a lender and pay the interest to keep their financial life and personal life separate.
Mortgage Repayments
Falling behind on your mortgage repayments can be pretty detrimental. If you fall behind, the mortgage company will start to believe that you cannot afford the house, potentially resulting in them taking action against you.
To avoid this, many people look to payday loans to tide them over until they can sort out their finances. It may be wise, however, to talk to your mortgage provider to see if you can change your plan into a more manageable one.
Seasonal Holidays
There is no doubt that when it comes to holidays such as Christmas or Chanukah, it can be a tight time for money. Parents often find it a struggle to pay for everything their child wants and often, they look to payday loans as the solution.
If you want to do this, beware that you are not taking out more than you can realistically afford to pay back (plus the interest). This appears to be a common theme around this time of year.
Birthdays can also be a problem too, but holidays like Christmas are a larger issue and are a very busy time for the loans industry.
Medical Emergencies
There are some things that the NHS does not cover for free. If you do not have private health insurance and you need treatment which isn’t covered by the NHS, a medical emergency can be a huge expense. It could from a few thousand to a few hundred thousand. If you do not pay off the medical bill straightway, it starts to build up interest. To avoid taking out expensive health insurance plans, people choose to rely on payday loans.
