There are many things that we can use payday loans to pay for because the lenders do not restrict the use of them. With some loans there are specific requirements for what they need to be used for but payday loans do not have this. This means that you can choose what you spend the money on. However, there are some restrictions still due to the nature of the loans.
The amount you can borrow
Payday loans tend to be for pretty small amounts of money. They are often for a few hundred pounds, although you may be able to borrow up to a thousand in some circumstances. The amount that you can borrow will depend on the lender and so you may be able to approach different lenders to see what they might be prepared to lend you. You may find that if you have used a lender before they will be more likely to lend to you. They may start by lending smaller amounts and then if you can show that you are capable of repaying on time, they may lend you a larger amount. This means that you may only get a few hundred pounds to start with. Whether this will be enough will depend on how much your overdraft is.
When it has to be repaid
It is also important to realise that a payday loan will normally have to be repaid when you next get paid. This means that you will need to find all of the money to pay back the loan, this includes the amount you borrowed and the fees when you are next paid. So, this could be a few weeks or maybe even a few days’ time. If you have only borrowed a small amount then this could be okay, but if you have a big overdraft and have borrowed a lot of money to repay it then you may find that you will find it hard to repay. You also need to think about the fact that you will have your other bills to repay as well, which could be expensive.
So, whether it should be used to repay an overdraft could very much depend on how much the overdraft is and how easy it will be to repay the loan. It is also worth thinking about the cost of the payday loan compared to the cost of the overdraft. Overdrafts can be very expensive and the interest rates tend to be high. If you compare the cost with a payday loan, you may find that using a payday loan for a few weeks could be cheaper than having an overdraft for that time. However, you will need to be really sure that you will be able to repay the payday loan. This because if you miss the repayment there will be higher charges and this could make it dearer then than the overdraft. You should find out before you take out the loan so that you know what risk you are taking. It is wise to think about how confident you are that you will be able to repay the loan and be completely aware of the consequences of not doing so.
It is also worth thinking hard about whether paying off your overdraft will really help you. This might seem odd but some people see their overdraft as a fund that they can spend. Therefore, once they have repaid it, they will spend it again. This can lead to problems as they can then have a payday loan to repay and an overdraft. Then when they get paid, their salary will repay the overdraft and there may not be enough left to repay the loan.
If you have an overdraft you may feel like you are in a rut and you want a clean slate. However, paying it off with a loan may not help. If you know that you will be able to get enough money and repay the loan, then it could help as long as you do not use the overdraft again. However, in some circumstances it will not help you, if you cannot borrow enough money, if you cannot repay the loan or if you go overdrawn again. Therefore, you need to think very carefully about it. It can be worth spending a significant amount of time thinking through whether it is a good idea and what the consequences might be of borrowing the money like this. It could be the answer that you are looking for as having to repay the payday loan very quickly and being forced to do so will clear the debt and you will be free of it. However, it may not be that easy and you will need to be confident that you will be able to afford to do this.