Do you need money to get you through the month and thinking of borrowing money? There are many borrowing options available including payday advances; credit cards and borrowing money from family and friends. But which is the right option for you?
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Borrowing Money from Family |
Payday loans look tempting and appear to be a fantastic idea to finish the month afloat. However, is turning to family and friends a better option to keep costs to a minimum? Quick Loans Express compares using family and friends to taking a loan and evaluates whether using your family is a safer and cheaper way to borrow.
The Advantages: Borrowing Money from Family
Many people automatically shy away from the concept of borrowing from family. We don’t want to acknowledge to others that we are struggling financially. We also don’t want to rely on them for cash or pressure them to lend. But, if you are willing to admit your struggling and ask for help then remember two things:
- First, family and friends are there to assist and encourage one another. In much the same manner as you’ll be there for them, they’ll be there for you – and they may be delighted to assist.
- Secondly, that is the most affordable type of charge there is: interest-free (unless your family is very mercenary) and without an actual deadline to cover off it.
The Disadvantages: Why Shouldn’t I Borrow from Family?
There are of course instances when you may not wish to involve your family and friends with your financial struggles. There is an old expression “friendships and money do not mix”. If you do not want cash to muddy an otherwise simple relationship, then the expense of a very cash loan may well be worth the price.
Is Borrowing Money from Family or from a Lender Better?
As we just mentioned, the price to borrow from family is significantly cheap compared to payday loans and you will incur little or no interest fees. Compare that with the amount you’ll pay to get a payday advance in the UK. It is not rocket science to recognise how much these different options will cost you in the long run. The interest rates for high-cost loans average around 1000%, and that can be very harsh if you are already struggling. Debt spiral is common place especially when it comes from not being able to pay back high cost credit you have borrowed.
The issue could be self-perpetuating. If you are in financial trouble today, a loan might keep you afloat with this month. But, it may kick your financial stability further down the line and this can take only a matter of weeks.
Payday lenders usually quote APR with the total cost of the payday loans. However, this usually appears more expensive than it really is. Nevertheless, most loans are designed to be paid off in instalments. Short term loans are mostly paid off in less than a year so the interest rates won’t be quite as much. Despite this, lenders will direct you towards the full cost of the loan for 1 year.
How Much Does a Payday Loan Cost?
Lets give you an example to put this into context:
You need to borrow £200 for 2 months. The representative APR is 1000% for a particular payday loan lender, so you will be paying £237.25 a month of interest and repayment of your loan. At the end of the loan period, you would have paid £274.51 in interest. The true cost of this loan is £474.51 for borrowing only £200.
Obviously, if you know, you can pay back within 14 days or early then it will be cheaper. But the cost of borrowing can be frightening.
What Do I Need to Consider Before Taking Out a Payday Loan?
If asking family or friends does not work for you then the next option may be to take a payday loan. Before considering a same-day loan, assess whether you can afford the cash advance and meet the repayments. This very much depends upon your monthly pay cheque. The longer you take the loan for the more it will cost you. Only take a payday loan if you have a strategy of how you will repay it.
Understanding What Borrowing Means
Whatever you choose, make sure it is the right option for you. For some of us, your family may end up being the lifesaver in a difficult time. For others, asking family may cause a break down in your relationship with them. Your relationship with them is worth more than some money. Before borrowing any money, from family or a payday loan online, research all your options. If you need help financially, contact MoneyHelper. They dedicate their resources by helping people struggling through debt.