There are some loans where you have to buy certain items with the money that you borrow. For example, you can only buy a home with a mortgage. However, there are also some loans where you can buy anything you like, such as when you use a credit card. With a payday loan it will fall into this category and you will not be restricted in what you spend the money on. However, it can be worth thinking hard about what you are going to use the money for as the loan may be more suitable for some uses than others.

What should I use the loan for?

So, it is worth thinking about what purchases are most suitable for using a payday loan for. Although there are no restrictions on what you can buy with it, due to the nature of the loan, you need to think about what uses it will be most suitable for.

• Emergencies – if you need money really quickly, then a payday loan could be ideal. This is because they can be arranged really quickly. It can be possible, in some cases, to arrange a payday loan in just a few hours. This means that if you need to pay for something extremely quickly, you should have the money available for when you need it. Most other loans will take significantly longer to arrange and therefore you will get the money at a much later date.
• When you can’t pass a credit check – payday lenders do not do credit checks. This means that if you have a poor credit record and you need to borrow money then you might be a bit stuck. However, a payday loan could just help you out as no credit check is done and therefore it does not matter whether or not you have a poor credit record.
• Cheaper items – payday lenders will only lend up to £1,000 and if you are a first time borrower, they may only allow you to have a few hundred pounds. This means that if you want a more expensive item then a payday loan may not be right for you. However, it can sometimes be hard to find a loan that will only allow you to have a small amount of money and therefore a payday loan could be suitable in these circumstances. It is good not to be forced to borrow more than you need as it will take longer for you to repay it, you might struggle to repay it, you might get overwhelmed by the debt and you might end up having to pay extra charges because you cannot repay it. It is tempting to think that borrowing extra is good as you will be able to treat yourself to a few things, but so easy to forget how much extra it will cost you and the difficulties that might arise as a result of those additional costs.

What should I not use the loan for?

Although a payday loan can be useful in many circumstances, there are times when it is better not to use one.

• Borrowing more than you can pay back – it is never wise to borrow more money than you can afford to repay. This is because you will end up having to pay extra charges for the loan. This could end up with you getting into a lot of financial trouble, perhaps using a loan to repay another loan and you getting overwhelmed by debt. So, make sure that you can afford to repay the loan before you sign up for it.
• Things that are very expensive – as you can only borrow up to £1,000 when you take out a payday loan, you will not be able to use it for things that are really expensive. You might consider taking out more than one loan so that you can afford more, but as the loans have to be repaid in one lump sum, this could be too much for you to be able to afford. Therefore, it would be wise to look for a different type of loan where you repay in instalments, so that it is easier to manage those repayments.
• Things you can save up for – if it is possible for you to save up for the item that you want, then it is better to wait and not borrow the money. Borrowing should only be done if there is no other way to afford something or in an emergency. Therefore, consider whether you can wait a while and put some money aside each month to pay for it. This is a method that takes some willpower as you will have to make sure that you do not spend the money on other things. Some people will find this easier than others.