A loan can help to get you out of difficult situations, but can also land you back in financial trouble if your repayments aren't affordable and you struggle to repay what you owe. Although many lenders will perform their own affordability assessments, it is paramount that you also know your loan is affordable before agreeing to the repayments.
Working out your budget is essential so you know you won't be straining to make ends meet each month. If you have little to no funds at the end of each month, you cannot afford to borrow money. If you have a substantial amount of money left, you will then be able to assess how much you can comfortably afford to pay for the term of your loan. In addition to this, you can then work out how much you'll have remaining while the loan repayments are also being paid. For accurate results, you need to be thorough with your outgoings. Don't forget the small bills that certainly add up, such as a window cleaner, takeaways and subscriptions.
Once you have ensured that your regular income will cover each of your monthly outgoings, you then need to think 'worst-case scenario'. Be sure that if you became ill or lost your job, your commitments will still be paid.
Regardless of whether you have a payday loan or a long-term loan, the above applies to all.
Websites, such as The Money Advice Service, offer a free Budget Planner tool which can be found here.
