Do I need a loan?

A man sitting down with his laptop and thinking

If you find yourself asking the question: ‘Do I need a loan?’ then there may be a few things you need to consider before you make your decision.

A tagWhat is the loan for?     

A search glassAre there any alternatives?

A piggy bankAnd can I save up for the purchase instead of taking out a loan?

These might be questions you’ve already considered, but it’s always worth double checking your pros and cons list before taking out any form of credit, especially credit with a higher interest rate, such as a short term loan.

Types of credit

There are several reasons to take out credit, and it is available in many forms. For example, when buying a house, you will probably need a mortgage, or if you’ve bought a house but you don’t have a bed to sleep in, you might use a catalogue loan to finance some of your furniture.

Loans are there to help, you as long as you are borrowing sensibly, within your means, and for justifiable reasons…

Some of these reasons could include:

Landing a new job and having to pay for a season train ticket before your first pay day.

An icon of a trainThis is a fair reason to take out a payday loan because you know you will be paid (and presumably have calculated that you can afford the repayment from your wages), and it is a one-off expense that you will be able to finance each month once you start receiving a regular income.

Unexpected, one-off bills can require a payday loan, especially if the expense is much less than what a bank will loan to you.

A bankTypically, banks will only offer loans of a few thousand pounds, so finding a small loan can be difficult, especially as you should never borrow more than you really need.

Furthermore, you don’t need a perfect credit history to take out a payday loan – sometimes a short-term loan is your only option. Just make sure you determine realistically if you can afford your repayments and if the purchase is necessary.

A girl lying down on top of a car in the sunshineA luxury holiday or a brand-new car are examples of potentially unnecessary, and even irresponsible, reasons to take out a short-term loan. Whilst these are fun purchases, they are not essential to everyday life and there are much cheaper alternatives.

While holidays are often well-deserved, if you cannot finance one without a loan, you may need to reconsider your options because it’s not worth getting into debt for.

Similarly, while we all like brand new cars (who doesn’t love that new car smell?), buying a car that is a few years old may be a much better option, especially if you’re considering its future re-sale value, as many new cars face a significant depreciation in value in the first few years of ownership. It’s sad but true.

Other options

Alternatives to high cost short term credit can include using an arranged overdraft, perhaps buying items second hand or, if it is not an immediate requirement, opening a savings account and putting a little away each month so you can avoid paying added interest altogether (plus most savings accounts will earn interest so that is always a bonus!). Of course, you can always ask a family member or friend if you’re really struggling, but sometimes you may not feel comfortable doing so.

If you are worrying about your finances, it is a good idea to reach out to someone because debt isn’t something you should face alone. If you don’t want to talk to your peers, get in touch with a free debt advice service instead.

At Clear And Fair Loan Comparison, we understand that these alternatives aren’t always available – and we know that unarranged overdrafts can be more expensive than payday loans. This is why we compare payday loans, for the unexpected costs in life that you didn’t budget for and may put your priority bills at risk by pursuing.

A image of a list with ranked bullet pointsWe rank our direct lenders by price only, so the loan at the top of your search page is the cheapest one available for the loan amount and loan period you are looking for. Understand more about finding cheap loans online here.

Thumb up signWe are an FCA regulated company and we only compare FCA regulated lenders, so our practice is, well, clear and fair.