If you have a credit card that needs paying and you do not have the money to pay it then you might consider whether to use a payday loan to repay it instead. There are pros and cons to doing this and it is worth thinking hard about this decision before rushing into anything. You need to consider a lot of factors so that you know whether it will be right for you.
The cost can be tricky to work out. With payday loan it is very easy. You will find that there is a calculator on the lenders website and so you will need to put in relevant information, such as how much you want to borrow and how long for. This will allow you to understand exactly how much you will be expected to repay and when. You will normally have to repay the loan in a lump sum on the day that you are paid. With a credit card you do not have a fixed repayment schedule. You will be expected to pay a minimum back each month and then it will be up to you when you repay the main balance. This can be a lot more expensive if you only repay the minimum and so if you pay it all off with the payday loan then you could save money. However, it will be cheaper to pay off the credit card with your own money directly, rather than borrowing using a payday loan, repaying the card and then repaying the loan. If you have the money available to repay the loan, then you can use it to directly repay the credit card. You do need to have good self-discipline to pay off the credit card and if you fear you may not have it then this could be a reason for choosing the payday loan option.
Ease of Repayment
It is worth looking at how easy each of the options is with regards to repayment. For some people it will be a lot easier if they have a more flexible repayment schedule. This is because they cannot afford to repay a lump sum all at once or they do not have a regular income. It is worth thinking about what might work for you. You may need to look back at previous bank statements and calculate how much you would normally afford to repay each month and perhaps think about whether it would be possible for you to budget in order to afford it better. Once you have calculated what you can afford you will then be able to work out what might be best with regards to finding a repayment schedule that will work with your budget.
If you have a payday loan then you will have to repay it really quickly. This can suit a lot of people if they prefer not to be in debt and to have their debt paid off really quickly. The loan will usually only last for a few weeks and then you will be free of it. With a credit card the term of the loan will vary depending on how long you choose to keep it for. You could choose to pay it off very quickly and be free of debt, in fact many people will pay off the full balance that they owe on their credit card each month and will never be charged interest on it.
It is worth also thinking about which will be most convenient to you. Think about whether you will want to repay the loan quickly which will happen with a payday loan and you will not really have a choice in this unless you pay a fee. If you would rather have more time to pay and spread the payments then you may find this more convenient and so prefer to do this.
A payday loan can be used for any purpose, including repaying a loan such as a credit card. However, you will need to think about whether this will be a good use of the money. It is well worth calculating the cost of this and considering any other options that you have to work out whether it is the right thing to do for you. It might be that you feel you will not repay the credit card as there is no urgency with doing so, but if you take out a payday loan then you will have to repay it unless you want to pay extra fees and therefore it will almost force you to make sure that you repay your loan. It could be easier to just set up a direct debit to repay your credit card in full each month, but you will need to make sure that you have the money available to cover the cost of this repayment.