What are Payday Loans for?

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There might be some people that are not really sure what payday loans are for. They might wonder whether they are designed to cover the cost of specific things or they may wonder whether there are certain things that you cannot use them for. It is a good idea to think this through though. This is because if you need to borrow money, you will need to choose the right sort of loan for your needs. Unless you know what different types of loans are for, you will not know whether you are picking the best one for your needs.

What Can They be Used for?

There are actually no specific things that guaranteed payday loans have to be used for. With some loans, they have a specific purpose. For example, if you take out a mortgage, then it can only be used for a house purchase. With a payday loan the lender will not specify what the money needs to be used for and they will not check what you are buying with it or ask you what it is for. However, there will still be limitations on what you can buy with it because of the features of the loan.

Limitations

  • Amount you can Borrow – with a payday loans you will only be able to borrow between £100 and £1,000. This means that you will not be able to use it to buy significantly expensive things. So, if what you need costs more than £1,000 then a payday loan will not be suitable for you. It is also worth noting that you may not always be able to borrow this much money either. If you have not used the lender before, they may only want to lend you a small amount of money. This is because they lend to people even if they have a poor credit record. So, they will want to build up trust with the borrower first and will therefore want to lend them a small amount and make sure that they will be able to repay that before lending them more. This means that you may only be able to borrow a few hundred pounds. This can therefore, really limit what you can spend the money on and so it might not be a suitable loan in situations where you need lots of money.
  • How Long you Borrow it for – a payday loan will only be for a few weeks or days. You will be expected to repay everything you borrowed plus the interest and fees on the next day that you get paid. So, if you need money for longer than this then it will not suit you. Also, you will need to make sure that you will be able to afford to repay that lump sum. Make sure that you carefully check your household finances to see whether you will have enough to cover it. You will need to think about how much you get paid and whether that will be enough and also whether you will then have enough money left to pay all of your bills and other essentials as well. If you borrow a lot of money, then this will be harder. It is really important to make sure that you can do this though. This is because you will find that you will get extra charges if you do not repay on time. Even if you do repay and then struggle to pay other bills you will get charged by those companies instead. Therefore, it is so important to make sure that you check carefully that you will have enough time to repay the loan on time and in full.

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