Payday loans are in place to offer a short term borrowing solution.  The Office of Fair Trading has found that it is one of the most cost effective solutions for a short term loan, and now the editor of Confused.com has also gone on record saying the same thing.  This was stated with the caveat that it should not be used for long term borrowing.

Unfortunately some people who take out a payday loan, when it comes to the time they are next paid, cannot afford to pay back the loan.  This is when not only payday loans become problematic, but all loans.  If you are unable to pay back a loan when you are supposed to, there will inevitably be consequences to that.  As payday loans are supposed to operate over such a short period of time, this problem can be exacerbated over a relatively short period of time as well.  It is therefore advisable to think carefully about whether you will realistically be able to pay back the loan when you are next paid before taking out a payday loan.

It is always better to rely on savings than to take out a loan, however this is not always possible.

It is often the case, of course, that people take out payday loans because they need money fast and do not have any other options.  It still holds true that payday loans are better value than unauthorised overdrafts, which are often the only other option when cash is needed in a hurry.  There are usually daily as well as monthly fees with unarranged overdrafts.  Still, it should be borne in mind that the cost of a payday loan will increase if it is not paid back when it has been agreed that it will be.

If all goes well then this should not be a problem.  The loans from Payday Loans UK are designed so that you can’t take out a loan that you cannot afford to pay back in the following month.  That is why it is insisted that you have a permanent job which pays every month above a certain amount.  This should mean that you will have the money to pay it back.  Of course the same sorts of emergency situation which may have caused someone to take out a payday loan in the first place may very well reoccur.  Taking out a loan of any kind is always a risk in this sense.

With payday loans this is a risk which many times simply has to be taken.  If it is an emergency situation when money is needed immediately, there may be no other option.  Of course dipping into savings would be preferable, but if you need a loan then that is precisely because you do not have the money you need right now.  Also, it is important to remember that the majority of people are able to pay back their loans.  It is unusual, and extremely unlucky, if two emergency situations in which money is needed occurs in consecutive months.  The potential consequences of this occurring should not be ignored however.

Overall then, a payday loan is just about the best short term borrowing solution to emergency cash needs.  As with all loans, however, the potential risks of not being able to pay it back should also be recognised.

Tags: bank loans, emergency cash, office of fair trading, Payday Loans, Payday Loans UK, short term borrowing, unauthorised overdrafts

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Ken Heading keeps up to date with all the financial news in the UK, particularly as it affects payday loans, and enjoys writing on this subject.

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