There are lots of possibilities for spending loans. Having this extra money can give us a lot of freedom and allow us to pay for things that we would otherwise not be able to afford. However, we do need to be sensible about what we are spending the money on. We need to be completely sure that we are making the right decision. We also need to make sure that we are choosing the right type of loan as well.
Should I Borrow?
The decision as to whether to borrow money is an important one. You need to think about whether you are happy with paying the cost of the loan for the item that you are spending the money on. Although at this stage, you will not know what the loan costs, as you will not know how much it will be as this varies with loan type, you will know that there will be some costs.
It is worth thinking about what you are using the loan for and whether you are prepared to pay this extra money for and whether it will still give you good value for money. This can be quite a complex decision and it is well worth spending some time thinking it through.
The first thing you should consider is whether you can afford the item without borrowing any money. This could be as a result of your spending your savings, for example or saving up for the item. Using your savings can be tricky. It can take a lot of hard work to save up money and we can tend to be reluctant to spend that money as we are perhaps keeping it for an emergency. It is worth questioning whether the item you are considering borrowing to buy, is an emergency and if it is then use the savings but if it is not, then consider whether you should really be buying it at all. Or, if it is not urgent then you could save up for it. Try to not be emotionally attached to your savings, even if you are saving them up for a specific purpose. You can replace them, perhaps with the money you would have used to repay the loan and it will normally be cheaper to use them, rather than borrow.
If you have no savings and need the money quickly for an emergency or you would take years to save up for the item, then it is likely that a loan will be a good option for you.
How to Choose the Right Loan
If you have decided that borrowing is the right decision for you, you then need to find the right loan. There are lots of different loans available but they all work differently and so you need to make sure that you pick the right one. This is sometimes really obvious as if you want to buy a home then you will use a mortgage. But if you need to buy food or pay a bill, for example, you will need a more general purpose loan.
There are lots of loans that fit this category and it is a good idea to know about them. You will find that they have quite big differences which is good to be aware of:
- How long they last
- How frequent the repayments are
- How much the repayments are for
- How much you can borrow
- How well-known the loan type is
- What the customer service is like
You will need to think about how much you need to borrow, how long you need to borrow it for and how much you can afford to repay as well as what you are looking for in a lender and things like that. It can seem quite complex but actually need not be. If you do it in a step by step way you will be able to eliminate certain loan types as you go through and it will become easier and easier.
Will a Payday Loan Work for Rent Deposits?
So you may get to a stage where you are left with just a few and you will need to see whether they will address your needs properly. For example, if you rent deposit is needed really quickly and is for less than £1,000 then you could find that you have the option of a payday loan. It will now be up to you to think about whether the loan will suit your needs. Consider whether it will be the right loan in terms of the repayment. You have to repay a payday loan in a lump sum and you should calculate whether this is something that you will be able to afford to do. Make sure that you will have enough money to cover it and also enough money left to pay for everything else that you need to buy.