Ways to Choose Between a Payday Loan and a Guarantor Loan


There are many different types of loans but if you have a poor credit rating then your choice will be limited. You might find that you will have a choice between a payday loan and a guarantor loan as these are both available to those with a poor credit rating. You might really need the money and therefore have to turn to one of these types of loans.

It is important that you choose the right one for your needs as they are quite different. Therefore, consider these points and it should help you to choose.

How much to borrow
The amount that you can borrow will vary between the two loan types. The payday loans tends to lend a few hundred pounds maybe up to a thousand. The amount you can borrow will tend to be low the first time you use a payday loan and the amount you get offered may increase if you show that you are capable of repaying the loan. This will vary between lenders.

The guarantor loan tends to lend larger amounts of money, perhaps in excess of a thousand pounds. This means that this could be a better option for you if you want to have more money. However, it is wise to never borrow more than you need as it is expensive.

Repayment schedule
With a payday loan you will normally have to repay everything you owe at once. This will be a payment that is scheduled by direct debit to come out on the day that you are paid. You will have to find the money to repay the loan and the interest all at once and then manage for the rest of the month having paid that money out.

A guarantor loan has payments spread over a longer time period. This may mean that you will not have to pay out so much each month which could make the repayment more manageable. You will also have a guarantor to pay any repayments that you cannot afford which will help you out if you need it.

Do you have a guarantor?
You will have to find your own guarantor if you want this sort of loan. This means that you will need to have a friend or family member who is willing to help you out. They will have to have a good credit record and sign up to cover any payments that you do not make. They will be liable for these and it will then be up to you to agree with them as to whether you have to pay them back and if so when you will do this.

With a payday loan you have no guarantor so you do not have to find someone to help you, but you will have full responsibility for repaying the loan yourself.

Length of loan
If you have a payday loan then it will need to be paid off in full after a few weeks. A direct debit is set up so that all of the money goes out at once on the day that you are paid. This means that the loan does not last long at all so you do not have to worry about being in debt for a long time,

With a guarantor loan, the payments are spread over a longer period. This is partly because there is normally more to repay so paying it all back at once would just be too expensive for anyone. It means that you will have the loan for longer but it could be easy to repay it.

Cost of the loan
Costs of loans vary a lot depending on which lender you use. Both of these types of loans can be comparatively expensive as no credit check is done and therefore the lender is taking a risk by offering the loan to borrowers. The guarantor loan has someone willing to pay, but it is still expensive as it is more complex and time consuming for the lender to organise this and so they charge more as a result. It is always wise to compare the costs of various loans and see how lenders compare. Make sure you compare the amount that will be repaid in full, including the interest and any charges, rather than just looking at the interest rate as this may not always tell the full story.

So as you can see, there are several important factors that you need to consider when you are deciding between the two types of loans. It is worth giving it a lot of thought as it could affect how easy it is for you to repay the loan, how expensive it is and how long you have it for. All of these factors are important but be sure to think about what is most important to you.

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How to Decide Whether to get a Loan


Borrowing money can be all too easy these days and it can be really tempting to borrow money without really thinking about the consequences. It is worth thinking hard about getting a loan though as there are many factors to consider. It is really easy to just focus on the money that you will get and how that will benefit you in the short term without thinking about the impact that the loan might have in the long term. Therefore, it is a good idea to just have a think about the effects it might have in the future.

Cost of repayments
It is good to start by thinking about how much the repayments are and whether that is something that you will be able to afford. It can be hard to know if you will be able to afford it in the future, but firstly work out if you can afford it now. Look back at bank statements and see whether you have money left each month that you could use to repay it. If not, look at what you buy and see whether you could cut down in order to free up the money that you need. If you are confident with this make sure that you also think about the future. Consider how long the loan will last and whether you are expecting to have any extra-large expenses come along in the future and how this might effect your ability to repay the loan.

Credit record
Having a loan will have an effect on your credit record, particularly if you miss a repayment. This could mean that if you want to borrow more money in the future, that you will not be able to because you do not have a good credit record. So, if you think you might want to get a mortgage or borrow money any other way or perhaps rent a property or some other thing that will require a credit check, then you will need to be careful about making sure that you do not do anything that will have a negative effect on your credit rating. You might think that it will not matter as the loan will be paid off, but if you miss a repayment or are late with one, then it will still show on your credit record even once the debt is paid off in full.

Cost of loan
It is well worth finding out how much the loan will cost you before you take it out. You should be able to get this information form your potential lender. Do not just think about the amount you borrow, that you need to repay but also the costs of the loan. This is not usually just the interest rate but there might be other costs as well such as admin fees, late repayment fees and things like that. Try to find out the minimum that you will have to pay plus any additional fees you might have to pay as well. Also consider that interest rates may rise and if you are on a variable interest rate you may end up paying more.

Missing payments
The idea of missing payments has been mentioned before but it is worth thinking about more. If you cannot afford a repayment then you will be charged and this will increase the cost of the loan. It might increase the term of the loan as well or make it harder to repay. It will also affect your credit rating.

Alternatives
It is worth thinking of whether there are any alternative things that you can do rather than taking out the loan. There are many people, for example, that take out a loan and have enough savings to cover the cost but feel that they do not want to use that money. Or they could save up for what they are buying with the loan, but are not prepared to wait. So, think about whether you could use your savings to pay or if you could save up and wait a while before you make the purchase and then not have to pay so much money for it.

So, with so many factors, it is worth thinking hard before you get a loan. You need to make sure that you are happy to pay the extra money for the items that you are buying, due to the cost of the loan. Also consider whether there are alternatives which will leave you better off in the long term. That you can afford the repayments, even if the rates go up and if you can risk a possible change to your credit rating. Also think about whether you might be stressed by getting a loan and how this might impact you, particularly if you are really struggling to manage the repayments.

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