Payday loans have become increasingly popular in recent years as a way of
individuals raising funds. A loan of this type is typically needed for something
short term hence the name payday loan but with bank loans and other kinds of
credit harder to come by since the last recession it can be a route that more
and more people look to in order to buy what they desire.
Reasons for needing a payday loan
Raise capital quickly – for someone needing cash quickly a payday loan could
be a good solution. For instance, someone needing to pay for car repairs or put
a deposit down on a holiday might want to raise extra cash fast rather than wait
and miss out.
Emergency – a payday loan is generally used to carry someone over until they
get paid. People could look to take one out in an emergency such as falling
behind with bills or having to purchase a new fridge or other appliance
What kind of people take out payday loans?
Anyone could be eligible to take out a payday loan however research shows that
many young people use this type of finance rather than running up an
unauthorised overdraft with their bank. It is believed that payday loan
candidates are typically young males.
Why not use other forms of credit?
It could be said that other forms of credit such as bank loans or car finance
could have more favourable terms than a payday loan. However, people quite often
do not want the hassle of applying for a bank loan. Alternatively they may know
that they would not qualify for that type of loan in advance. Some other reasons
for not applying for more traditional credit could be:
– To avoid borrowing from friends or family – some people may not like to
admit their money worries to loved ones and a payday loan could be just the
thing to put them on.
– Bad credit – in some cases people don’t qualify for more typical forms of
credit. It could be possible to meet the requirements of a payday loan even
with previous bad credit.
– Speed – people looking for a short term loan of just a few weeks don’t
usually have the time to go through potentially lengthy approval processes. As
such a payday loan could be a quicker option to pursue.
A payday loan could be just the right type of loan depending on the
circumstances for any individual.