Budgeting for expenses on a month-to-month basis is never fun or especially easy. It is hard to calculate exactly how much money a variable expense such as food will require, but it is easy to budget for fixed expenses such as subscriptions. Combining these two categories into a workable budget requires attention to the details of precisely how much the budgeter spends each month as well as foresight about the potential expenses of next month.

Sometimes expenses go awry no matter how carefully one sets up a budget. The most common response is to ask a friend for money, but this is awkward and potentially embarrassing. Another solution is to apply for a personal loan from a lender, but they usually will not lend the loan for a short enough term. This is why payday loans have become so popular. A payday loan is a very short-term loan that is advanced against the borrower's next pay cheque.

Payday loans are typically between £100 and £1000, and they are expressly intended to cover a borrower's expenses until their next payday. On a provisional basis, they should never exceed thirty percent of the borrower's net income. This is to prevent borrowing more than the borrower can repay, and to make sure they will have enough money to cover the loan and the interest.

Here is the catch when it comes to a payday loan: the interest rate is very high indeed. Annual interest rates (APRs) can reach into the hundreds of percent with payday loans. This is why payday loans are always due between two weeks and a month from the date of borrowing and why it is always very unwise to roll over a payday loan into the next pay period. The interest rate will wipe out any advantage the loan originally gave the borrower.

It is wiser to repay the payday loan and to simply take out another one if they need the loan later. Never under any circumstances roll over a payday loan; the worst situation is when the payday loan is rolled over for multiple pay periods. The high rates result in the loan amount owed increasing to staggering amounts, which can make it difficult if not impossible to repay in a timely manner. The longer the loan is kept, the larger the amount owed over time.

Often if a payday loan company is concerned about non payment they will enlist the services of a debt collection agency - quite aside from these organisations typically being pretty unpleasant, this normally results in an additional charge being added to your account. Likewise a bounced payment may well mean additional charges on your bank account.

If the loan is not repaid, it could damage the borrower's credit, which makes it difficult to obtain any other financing from conventional lenders in the future. Thus it is in the borrower's best interest to repay the loan when it comes due - and if this looks too difficult, then you should avoid taking out the loan entirely