Warning: Late repayments can cause you serious money problems. For help, go to moneyhelper.org.uk. We are a broker not a lender.
Warning: Late repayments can cause you serious money problems. For help, go to moneyhelper.org.uk. We are a broker not a lender.
Dec 18, 2019
Young people, in particular, may underestimate the importance of their credit score. However, the world's economy is based on debt, meaning that the amount of money you have on-hand is not as important as the amount you have at your disposal. In other words, having more available credit could be better than literally being rich!
Without good credit, you may not be able to buy a car, a home, or even rent an apartment in many places. Unfortunately, building credit can take a long time. Even worse, your credit could be ruined virtually overnight simply by falling behind on bills, missing due dates, or defaulting on even a single loan. This can happen through no fault of your own, due to an accident, sudden loss of employment, or a relatively minor financial emergency.
Many credit card companies and banks are willing to work with you, to be sure – especially in extenuating circumstances – but you still need day to day pocket money to get through in the meantime. This is where a payday loan can come in handy.
Studies show that a majority of borrowers use the money for regular bills and expenses, which is not a bad idea if you are already overextended on credit or do not want to jeopardize your credit standing. Just keep in mind that short term loans are not suggested for use as long term solutions or for large purchases, and credit cards are not suggested for small purchases.
These short term loans can help you build your credit by keeping you current on your bills and covering day-to-day costs. Simply include them in your budget along with your other, regular bills, and use the extra money to pay down your credit card debt. The less your ratio of reported debt to available credit, the higher your FICO score. Because these loans are not reported, they are not included in determining that ratio.
Of course, payday loans are also useful in cases of emergency or when you need extra money quickly. As mentioned above, they can help cover sudden unemployment, costs brought on by accidents, and those incurred by unforeseen circumstances like necessary car or home repairs.
Even though most credit cards offer cash advances, their rates are higher than those for purchases and, in too many cases, even higher than that of the average payday loan. Plus, if you get cash advances from your credit card, you run the risk of ruining your credit score.