If you are thinking of taking out a payday loan, one of the first question you might ask is how much will it cost. We tend to decide whether we are going to buy things or not based on the cost and so it is a perfectly legitimate question to ask. This is not a simple question as the price will vary depending on a number of factors.
- What the lender charges – the amount a
lender charges will depend on a number of factors. They will have costs and
they will decide how much they are going to charge you based on this. Some
lenders will just end up charging less than others and some will be more
expensive. You may want to compare the costs of the different lenders so that
you can find the one which you feel will offer you the best value for money. It
is important to realise that it is not just the cost that is important when
choosing a lender though. You need to be able to feel happy with them, trust
them, feel they provide a good customer service and a loan which has terms that
you are happy with.
- How long you borrow for – As you will be
charged interest daily on your payday loan, the longer you have the loan for,
the more you will pay. This means that it is wise to work as hard as you can to
keep your borrowing period as short as possible. If you can wait some time
before you borrow, maybe even if it is just a few days, it will mean that the
loan will be cheaper. Even saving just a little bit will make some difference
and so it is worth it.
- How much you borrow – Interest is calculated
based on not just the amount of time that you borrow for but the amount that
you borrow. The more money you borrow; the more expensive it will be to borrow
it. This means that it is important to make sure that you borrow as little as
possible. If you can, use savings and other money that you have before you
borrow so that you do not have to borrow more than necessary. Also think about
whether there is a cheaper alternative to what you are buying with the money
which might mean that you can borrow less.
- Whether you repay on time – it is
important to make sure that you repay the loan when it is due. In some cases
this just might not be possible, perhaps if you spend too much money before the
loan payment is taken out or if your pay is not enough to cover or the pay
arrives late. In any circumstance where you are not able to repay on time you
will find that there will be additional charges to pay. These can significantly
increase the cost of the loan. This means that it is really important to make sure
that you do repay the loan on time. You need to look carefully at your finances
and do everything you can to make sure that there will be enough money
available. This will probably mean that you will need to budget and only spend
money that is totally necessary. You might even need to think of some ways to
earn more money so that you can afford it. Maybe you will be able to sell some
things to get a bit of extra money or do some extra hours at work. It is worth
thinking about what you might be able to do in case you are in the situation
where you need to do this.
It is worth knowing that a lender will normally have a
calculator on its website where you will be able to work out how much the loan
will cost you. If you put in how much you want to borrow and how long for, it
will tell you how much you will have to repay in full. If you take away the
amount you are borrowing you will be able to calculate the cost of the loan.
Once you have this figure, not only is it useful for comparing the cost with
other lenders, but you will be able to use it to work out whether you think it
offers you good value for money. Consider whether the item that you are buying
with the loan is worth this extra cost that you will have to pay if you want to
get it. Imagine the item you are buying costs its price plus the cost of the
loan and think about whether you would buy it if it cost that much. It may be
that it is an emergency purchase and you have no choice, but if it is not then
think about whether you want to pay this much for it.
There are a lot of payday lenders and if you are considering
a payday loan then you might be rather daunted by trying to decide which of
them will be the most suitable for you to use. There are many factors which
could influence you in your decision as well. With most people, cost would be
very important, but in such a competitive market there may not be huge cost
differences between the different lenders. This means that it might be wise to
look at other factors as well. One of these could be the reputation of the
lender. Some people feel that they really want to use a lender with a good
reputation so that they feel they can trust them better. Therefore, they will
need to do some research to find out more about them and what others think of
- Ask friends and family – asking the
opinion of friends and family is one of the most useful things that you can do.
This is because they will have no reason to be biased and they will want to
help you. This means that they will be totally honest with you. Therefore,
asking them whether they have had payday loans and what they thought of the
lenders that they used is really important and can be extremely helpful.
However, you may feel a bit awkward explaining to family and friends that you
need a payday loan. For some people it will not matter, but for others, they
will feel that they do not want to highlight that they are borrowing money. You
may also find that you do not have any family or friends that have used a
- Ask colleagues – you may also find that
asking colleagues is useful. You might be more prepared to tell them about
borrowing money or they may have more experience of borrowing than your friends
and family. Even if you have information from friends and family it is worth
asking them as well as you might be able to get even more information. You
could always just start a conversation about payday loans and see if anyone
mentions they have tried one and then you will not actually have to mention
that you are thinking of getting one.
- Search lenders websites – it can also be
wise to look at the websites of the lenders that you are choosing between.
Although you won’t be able to find out what others think of them, it will give
you more information about them which could be the most suitable for you.
Finding out more about what they offer and details of the lender will give you
more ideas about whether they will be the best lender for you or not.
- Look at online finance sites– there are
many online finance sites where people discuss things such as borrowing. You
may find that some have message boards and forums where people discuss their
experiences. These can be really useful as you will get personal accounts and
you will be able to think about whether you feel you can trust a lender based
on what others are saying about them. It can be a good idea to keep aware that
these sites could be biased. It is very easy for rival lenders to write
negative things about each other to try to get people to be put off them. They
could also put positive things about themselves. Look at a selection of sites
and this should help to reduce the chance of bias. Also try to use sites that
you trust. You may find that people are more likely to say bad things about a
lender than good. IF they have had a good experience they will not really have
a reason for doing anything more, but if they have a bad experience they are
more likely to make a fuss about it, perhaps to warn others or in the hope that
the lender will compensate them. Therefore, it can look like all lenders are
bad if you look at sites like this but it might just be the case of trying to
find the one with the least amount of bad things said about it.
- Review sites – there are sites which
review lenders. These can be useful in identifying which lenders you have to
choose form but you have to be careful with the reviews. Sites like this tend
to earn commission on the leads they generate as a result of their reviews.
This means that they are much more likely to give a positive review to a lender
which will generate them more commission compared with one that will give them
less or none at all. Therefore, you need to be cautious with sites like this
and try to figure out whether they will be completely honest with you or
whether there is a reason to think that they might be biased.