Managing your money can be difficult, especially if you’re on a low income, and if you’re faced with an unprecedented expense, this can cause serious money worries. But this is where a payday loan can come in useful. If you’re struggling to stretch your income in the face of inflation and the cost-of-living crisis, an emergency expense can prove fatal to your cash flow. Payday loans offer flexible conditions, so you can manage a crisis more easily. Read on to find out more about these loans and why people choose to use them.
What is a payday loan?
To understand why people need payday loans, it’s always best to know a little bit more about what they are. A payday loan is most commonly used to cover emergency expenses that cannot be covered by a person’s monthly income. They are short-term, unsecured loans, which often means they come with high-interest rates for the borrower. If you’re faced with an emergency, like an urgent boiler repair, or your car needs new parts to run, if you don’t have emergency savings, this can become an issue, and you may not be able to deal with a crisis. This is where payday loans can come in useful for some. If you’re faced with an unprecedented expense that your cash flow cannot cover – you don’t have to go without.
Payday loan lenders
Payday loan lenders are different from traditional lenders, like banks and other financial institutions, and they are often referred to as alternative lenders. Many of these lenders are based online, so borrowers have access to a huge range of payday loans to suit them. Because these lenders are separate from traditional financial institutions, they can offer more flexible terms, so even if you have bad credit, or have struggled with your finances in the past, they can help.
Why do people apply for them?
There are many reasons why people might need to apply for a payday loan, which we will look at in more detail below, with one of the most common reasons being to cover emergency expenses that they are faced with. Here are 3 reasons why people might decide that a payday loan is the best option for them.
- To cover emergency costs
You never know what’s just around the corner, whether that’s emergency medical bills, a broken-down car, or a faulty boiler that requires repairs. If money is tight, you’re on a low income, or you’re struggling to manage your money to make it go further, you may have no way of paying for these repairs to be done. This is why many of us apply for payday loans. They can arrive in your bank quickly – much quicker than a traditional loan – and you can use them in any way you need to. If you can’t wait until payday, these loans help you give your monthly income a boost so you can deal with unprecedented situations more easily.
- To cover periods of low income
All of us have varying levels of income. If you work shifts or have a contract that differs in hours each month, for example in a seasonal job, your wage at the end of the month may be different than it was last month. This can be particularly difficult if you’re not getting many shifts – you still need to pay your bills! If you’re going through a particularly quiet patch in employment, and you need to cover your bills, a payday loan could help. Of course, these loans are only made for short-term assistance, and should never be used over a longer period, so if you’re expecting low income over the coming months, this type of loan may not be the best choice for you.
- Flexible conditions
One of the most notable benefits that come with payday loans is that they offer some of the most flexible loan conditions. Various online, alternative lenders offer loans to those with bad credit, basing their decisions on affordability rather than credit score. Traditional lenders like banks base their approval on how you’ve paid off your debt in the past, so if you’ve struggled to manage your money, it’s likely you wouldn’t get the funds you need from them. Although alternative lenders offer flexible conditions and easy application, you should be aware that if you are approved, this may result in higher interest rates. You should make sure you can afford your payday loan, and check the conditions before applying, so you don’t fall into further financial difficulty.