Why is a personal loan better than a pay day loan?

I am a strong believer in saving, being thrifty and earning more when you need to, in order to avoid borrowing. But there are occasional times in most of our lives when we do need to borrow money. Last time I took out a personal loan I bought a car. It worked out well for me and I carefully planned how much I could repay each month.

People borrow money for all sorts of reason and there has been a big rise in recent years of those taking out pay day loans.

A pay day loan is a  relatively small amount of money lent at a high rate of interest on the agreement that it will be repaid when the borrower receives their next wages. It may get someone out of a fix but it can get them into a whole heap of trouble.

The problems with pay day loans

I have friends that have gotten into a lot of trouble over pay day loans…wanting money in a crisis…knowing they can pay it back on payday but not thinking through how they are going to afford to live the following month. So then they get another pay day loan  and it goes on. Eventually when they can’t pay back the pay day loans the (very high) interest rates get slapped on and the debt increases and increases.

Pay day loans can also be accessed very easily and quickly with few checks and not much room for thought. This is never the way to tackle a money problem. Borrowing needs to be undertaken with consideration and within the framework of  sensible calculations

Personal Loans

Personal loans can also be agreed online and the same day BUT those issuing them check your accounts, credit history etc. before agreeing . It is a more secure and planned approach. Some personal loans like those offered by the TSB allow you to over pay  (so you aren’t stuck with long term repayments if you would rather pay it off early.)

They also allow repayment holidays, so if some months you are struggling because it isa holiday month or a big birthday or the roof falls in then you can have a break.  You will get a fixed, lower, more manageable interest with a personal loan. Basically you will have a clear repayment plan that you know about in advance.

Personal loans are a more sensible approach to borrowing and I strongly advocate with money do BE SENSIBLE or you really can end up in serious trouble.

 

 

 

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