Some people get very worried about whether they will be able
to repay a payday loan if they get one. This is understandable as many of us
hear stories about people that struggle with loan repayments and payday loans
seem to get particularly bad press about this. There is always a risk that the
repayment will be too difficult to pay, but many people do mange to do it. It
is worth thinking more about whether there is a risk of you not being able to
repay rather than worrying about what has happened to others. Having a good
understanding of how the repayment works and considering if it is something you
can cope with, is therefore really important.
How do payday loan repayments work?
When you take out a payday loan you will normally be expected to repay everything you borrow plus the charges in one lump sum. In order to make this easy to manage you will have a direct debit set up on the day that you are paid. Then you should have enough money in your account to cover the cost of the loan repayment. If there is a risk that your pay may arrive late then try to schedule the direct debit on a day that you are sure the money will be there. Then you reduce the risk of being charged for a late payment, which can be very expensive.
Would I manage the repayment?
It is worth thinking about whether you will be able to manage the repayment on the loan. You should be able to find a calculator on the lenders website where you will be able to find this out. You will be able to see how much you will repay in full and this will include the amount you have borrowed plus the charges you will have to pay. Then you will be able to take some time to work out of you could afford this. By looking back at previous bank statements you will be able to see whether you would normally have enough money to afford this repayment and cover the cost of all of your other needs as well. It is worth thinking about whether you are likely to have any extra expenses that you will have to manage on top in that particular month. Perhaps a birthday, a quarterly bill or something like that which could have a significant impact on your ability to manage. It might be that you will be able to cut down in some areas so that you have enough money left to pay everything. This will depend on how many luxury items you normally buy and whether there are items that you are prepared to go without for a while so that you can afford the loan. Some people are more easily able to cut back than others and it is worth taking a look through your bank statement at the things that you normally buy and the places that you spend money to see whether you will be able to easily cut down anywhere.
What happens if I cannot manage?
If you cannot manage then things can get expensive. If you miss a loan repayment or cannot afford to make a full repayment then there will be significant charges and these can soon add up. This can put pressure on you and make the situation stressful so it is good to avoid this if you can. If you cover the loan but do not have enough money left to cover the rest of your bills then this can be equally stressful. You may be able to make arrangements with some companies to repay them less for a while, but they may charge you for letting you do this. You may be able to cut down your spending in other areas that could help you to manage as well. If you do find it impossible then you may have to get another loan. This can be a really tricky situation to get into as you may find that you start having to get loans frequently as your expenses will rise due to the loan costs.
So, make sure that you are really confident that you will be
able to repay the loan when you need to. This will make a huge difference to
the cost as well as the stress of the loan. It can be a really good idea to
work out how you will manage financially once the loan is paid as well.
Consider where you might be able to cut down so that it is easier to manage. It
is wise to cut down anyway if you can, even if you think that you will be able
to manage. Then you will be prepared just in case there is a problem.