Should I use Savings or Payday Loans?

We all have to make financial decisions and some of them are easier than others. We might be choosing between a branded item or own brand in the supermarket, deciding whether to buy insurance or wondering whether to save up for something or borrow the money. These decisions can sometimes be really hard and it can be worth thinking about what you might want at the current time as well as in the future as this should help you.

Advantages of keeping savings

It can be difficult to build up savings and so we tend to want to keep hold of them. It might be that we save a certain amount each month so that we can build up a good amount. It might be that we put in a lump sum, perhaps form a gift or inheritance and want to use it for something special. Therefore, the money might have a special value for us and we therefore would want to keep it to spend on something really good.

We might want to keep the money for when we have a financial emergency and have no other way to pay for something. This might make us prefer to take out a loan if we can and use the money when we have no loan options left. It might make us feel more secure that way.

We might be saving up for something specific and might feel that if we use that money then we will not be able to buy that thing. Therefore, we can get attached to the feeling that the money is only for that purpose. For example, if we are saving up for a holiday, then we may worry that we will not be able to have that holiday if we spend the money on other things.

There is always the risk that if we start spending the money that we have saved, then we could end up spending more and more of it and then have nothing left. If you are worried about this then you will be justified in thinking that it will be better to keep the money in the savings and borrow.

Advantages of payday loans

Payday loans can be arranged really quickly and so if you do need the money fast you will have no need to dig into your savings in order to pay for the items that you need. They will also lend to people with a poor credit rating and so you will not need to worry about the results of a credit check when you are considering whether they are the right loan for you. As long as you are happy that you will be able to repay the loan, then any borrowing can be seen in a positive light. Of course, many people do borrow and do not check whether they can afford to repay and that is where problems can stem from.

Which to choose

It can be a very tricky decision to make but it is worth thinking about a few specific things.

  • Cost – It is worth calculating the cost of the two options and think about which appeals that way. You will find that if you add it up the loan will cost you more money than the lost interest on the savings. You will need to see whether you are happy paying out that extra money so that you can keep hold of your savings. Some people will be happy to do that and others would rather use their savings and then put the money back into their savings when they can afford it.
  • Convenience – it might be more convenient to get a loan if your savings are tied up. Some people have money in bonds or notice accounts and it can take time to get the money out. However, they will be able to get the money for the loan very quickly, perhaps even within a few hours. On the other hand, if the savings are in an instant access account then you might find it quicker to get hold of those than have to apply for a loan and wait for the money to come through.
  • Repayments – It is always important to make sure that you are confident that you will be able to repay the loan that you take out. This could be any type of loan and could be a series of repayments or in the case of a payday loan just the one. It is wise to take a close look at your finances to see whether you think that you will be able to afford this.
  • Future – it is also worth thinking about the future as well and what the consequences of either the loan or the lack of savings will have.
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