If you have not had a payday loan before then you may not be aware of how much it costs. Payday loans do have a reputation for being expensive and this can put people off looking into them. However, it is well worth understanding more about them and how they are different to other loans as well as looking at the cost so that you can decide if they are a viable option for you.
How to calculate the cost
It is very easy to work out how much a payday loan will cost you. Firstly, you need to be aware that lenders will vary in what they charge and so if you work out the cost for one, this will not apply to every lender and so you will need to compare them to find out which might be the cheapest. To find out the cost you should be able to use the calculator on their website. They are set up to be simple to use, so you just enter the amount that you wish to borrow and how long you will borrow it for and it will let you know how much you will have to repay in full and form that you can work out how much they are charging. This is an easy way to compare the costs of different lenders. You may not be sure how many days you will need the loan for but you should be able to work this out. You will have to repay it on the day that you are paid, so work out how long it is until then and that is how long you will need it. If you are not sure exactly which day you will take it out, then make a guess, but make sure that you use the same figure for all lenders and you will be able to get a fair comparison. It is best to wait as long as possible before you take out the loan as you will then repay less money as you are charged for each day that you hold the loan.
Why is the cost relatively high?
You may wonder why the cost of a payday loan seems relatively high compared to some other types of lending. Firstly, short-term borrowing looks more costly as the admin charges all have to be paid over a short period, However, with a long-term loan, this can be spread across lots of repayments and so is less noticeable. You will also pay more to cover the risk that the lender is taking by lending money without doing a credit check. If repayments are not made on time they will have costs as they will have to try to take the money form you at a later date and there will also be costs of them not getting the money back as they will not be able to lend it to someone else. Some of these costs are covered by the additional fees that they charge when you do not repay on time, but this is also taken into account with the main charges too.
Can I afford it?
It is really important to work out whether you can afford a payday loan. You need to consider the repayment date and the repayment amount and think about whether you will be able to manage that repayment. It can be easy just to assume that you will because it comes out of your account on the day that you are paid. However, you will need to make sure that you have enough money available to cover all of your other expenses as well. You will still have to pay for all of your other commitments such as rent or mortgage, other loan repayments, tax, contracts, utilities, transport and food. This means that you will need to make sure that you will have enough money left to pay for these as well as covering the cost of the payday loan repayment. You should be able to find out by looking at your past bank statements and noting down what expenses you expect to have and what income you expect and adding them up.
Is it the right loan for me?
It is really wise to make sure that you compare your options. Make sure that the payday loans will be the best one for you. Even with a poor credit rating you may find that there will be other borrowing options available for you. It is worth considering these and finding out whether there are alternative options for you. You also need to consider the cost of the loan and how easy you will find it to repay. There are a lot of factors to consider and you need to carefully compare all of your options so that you can choose the one that is most suitable for you.