With the Christmas period fast approaching many consumers are perhaps wondering just how they will fund the festive period and afford all those presents and gifts for loved ones. Taking out a payday loan has become a popular way of bridging the gap between paydays and can provide a fast cash solution in a financial emergency, which is why many may consider them a good choice when it comes to Christmas.
What is a Payday Loan?
The concept of a payday loan is nothing new but they have become very popular in recent years especially with the tough economic times in many countries. They work like a cash advance on your wages and are generally repayable from your next pay cheque. Loans are available for any amount up to £1500 over a term of 14 days. Some lenders will offer larger loans if you are a high income earner and it is possible to borrow over longer terms. The problem with payday loans however, is the high rates of interest charged and this is something consumers do need to think carefully about.
The interest charged on a payday loan can be anything from 300% to 3000% as lenders are free to set their own rates. Some lenders will charge a fixed fee per £100 borrowed and this can be anything from £15 to £25. There is often little difference between loans with interest added or fixed fees. Not all loans or lenders are the same and consumers are advised to research the market thoroughly before applying.
So Should You Fund Christmas with a Payday Loan?
These loans can be expensive, but they can sometimes work out cheaper than taking out a cash advance on a credit card or extending your bank overdraft. But you should remember that you have to repay the loan in full on the due date, unlike a credit card or overdraft where you can spread the cost.
Some lenders have anticipated a rise in the number of consumers taking out payday loans over the Christmas period and have devised new terms for this purpose. A Christmas payday loan is relatively new to the market but lenders offer slightly lower rates and extended terms of up to 31 days.
What to Do Next
If you are considering a payday loan to see you through Christmas, do budget carefully to ensure you can comfortably afford to repay the loan at the end of the term. Compare as many lenders as possible to find the best deal for you and the best rates, but do ensure the lender is reputable and established within the payday loan industry before applying.