Whenever you are thinking about whether to take out a loan, it is important to go through a long thought process and lots of research. This is true whether it is a payday loan or not. However, we will deal with a payday loan in this example and work through what you should be thinking about.
Do I Need a Loan?
It is wise to start by asking yourself whether you really need a loan. Borrowing money is expensive and so it is a good idea to avoid it if you can. Think about what you are using the money for and whether you really need it. Consider whether you can wait for it and save up and also think about whether you have savings already that you could use. Using saving is tricky as we might like to have some just in case, we need them or we might be saving up for something specific. But they can be replenished and it will usually be cheaper to use these rather than borrow. If you feel that you will find it too hard to save up, think about a way that might help, such as setting a regular transfer into a savings account.
How Much am I Prepared to Pay?
It is a good idea to think about how much money you are prepared to pay for the loan that you are taking out. You need to consider the fact that all loans have a cost which you will need to pay and you need to consider how much you can afford and want to pay. Think about what you are using the loan for and the cost of that and then how much more you are prepared to pay for it in order to have it and that amount so how much you are prepared to pay for the loan. You might find this hard but start at extremes – you would be prepared to pay a few pounds extra but not a few million pounds and then move more towards a central figure until you have pinpointed a range or amount that you are prepared to pay.
What Can I Afford to Repay?
It is also well worth taking a look at your financial situation in order to calculate how much you can afford to repay. This will vary between different people and you will need to look at your bank statements in order to work it out. Take a look at what you get paid and what you normally have to pay out and this should help you to be able to work out how much you have left to be able to pay out. You may have to cut back on spending in order to do this, so only allow for this if you are completely sure that you will be able to do this.
Is the Loan Type Good Value for Money?
Now you need to look at all of the different loans to see which will fit your needs. Consider things like how much you want to borrow as well as what you can afford to repay and then you will be able to think about which is most likely to offer you the best value for money. This will allow you to be able to identify the best.
Which is the Best Lender?
Once you have decided which loan type will be the best, you will be able to compare the different lenders that are offering this type of loan and you will be able to compare them and choose the one that you feel is best. They are likely to vary in things such as cost and therefore it is well worth doing this as it could make a big difference with regards to the value for money that you get from your loan.