You have been approved for your payday loan and have successfully used it to pay your bills. What happens next? You must repay the loan (in accordance to your agreement), in order to avoid late fees and interest charges. However, we realize that things do happen and circumstances may arise that prevent you from paying back your loan as you originally planned. This article will cover the different factors that come into play when paying back your payday loan.
Payday loans are unsecured loans. This means that you do not have to provide any type of security. So in the event that you default on the loan the lender has less recourse to take in order to collect on what is owed.
Just because the debt is unsecured does not mean that there are no consequences if you fail to pay it back. You will continue to incur late fees and interest until your payday loan is paid off.
The worst thing you can do with your payday loan is to put it off. Writing your payday loan off as unimportant and putting it at the bottom of your list of debtors is a huge mistake. Chances are your payday loan is collecting the most interest of any of your debt. There are two schools of thought when paying off debt.
Pay off the highest amount: The first suggestion is to pay off whichever debt has the most accumulated. For instance, if you have 3 credit cards with balances of £1,000, £2,000 and £3,000 you should pay off the £3,000 one first.
Pay off the one with the highest interest: This method involves looking at how expensive each debt is and using that to determine the order in which you pay them off. For instance, if you have 3 credit cards with APR‚s of 2%, 7%, and 20%, you should pay off the card with the highest APR first, in this example, the card with 20% APR.
Whichever school of thought you subscribe to is your personal preference. But when you have payday loans involved the second school of thought is much more prevalent. Mainly due to the fact that payday loans come with higher interest than normal so failure to pay them off can increase the amount that you have to pay substantially.
In the event that you are unable to pay off your debt in full at the agreed upon date, the worst thing you can do is to avoid your payday lender. We know that it can be stressful but avoiding them will only make the situation worse. Lenders are always willing to work with you if they are aware of your situation.
If you ever find yourself in a situation where you think you will not be able to make your full payment, contact your lender promptly before your payment is due and let them know what you can afford to pay. You will always find that the lenders are more than happy to help.