The short answer to this question is no: you should not take out a payday loan to settle another short term payday loan. This way of settling loans can lead to a spiral of debt that gets increasingly hard to escape from with every loan you take out. Not only that, but as the interest increases on the loan, you’ll need to borrow more to pay it off, so you’ll end up spending far more than if you’d paid off the first loan originally.

Furthermore, taking out too many loans (and sometimes applying for too many loans) can reflect badly on your credit file and reduce your chances of obtaining credit in the future, so you should only apply for a loan if you really need it, and you should only apply for one at a time.

Before You Take Out The Loan

Before you take out the loan, it’s a good idea to create a budget sheet of all your upcoming expenses so you know whether you can afford the loan repayment. It’s very important to be realistic about your budget sheet, as most people spend more than they realise. Think about your recent purchases and divide them into two categories: one for necessities and one for luxuries.

Once you’ve drawn up your budget sheet, make sure you stick to it so that you know you can make your repayment hassle-free. For more saving tips when you’re on a budget, click here.

Of course, we understand that sometimes it isn’t that simple: your financial circumstances can change in the blink of an eye and suddenly the repayment at the end of the month can seem like a daunting prospect rather than a sure decision.

What happens if my circumstances change?

If you find yourself in a situation like this, the best thing to do is contact your lender – but not to take out another loan. Payday lenders want to help you pay off your loan in a way that you can afford and may be able to freeze the interest and charges to make your loan repayment easier. Some may even spread the repayment over a few months, so each repayment is smaller, which gives you a chance to gather your finances and get yourself in order. It also means you can still afford your priority bills and essential expenditure. Unfortunately, life’s little luxuries may have to go on hold for a while.

Sometimes admitting you can’t pay back your loan isn’t an easy process, and you might not know what the process actually is with your lender and how they may take action against you. The good news is, there are regulations in place which mean lenders must treat you fairly in respect of your financial difficulties as per the General Principles of Fair Practice. However, if your circumstances begin to change for the better and you find you can repay a larger amount than you currently are, you should also get in contact with your lender so that you can settle your loan sooner.

A man who looks fed up staring at his laptop screen in a cafe.

What do I do if I'm worried about my finances?

If you find you are considering taking out more than one loan at a time, you might need to address the issues head on. Once you’ve addressed the problem, however big or small, you can begin to tackle it and hopefully have it resolved. Talk to your friends and family if you are really struggling because a problem shared is a problem halved, and sometimes emotional and familial support is what you really need when life puts you between a rock and a hard place.

If you are worried about your finances or you’re just beginning to get concerned that they’re slipping out of hand, there are several free and impartial debt advice services you can talk who will be more than happy to help you. They can offer advice or take it one step further and assist you in putting a plan in motion to start repaying your debt in a way that you can afford. Some of these services include StepChange and National Debtline.

However, if you haven’t already got a payday loan and life has thrown in an emergency expense that you haven’t quite budgeted for this month, offers payday loans and Multi Month Loans so you can find a loan and repay it in a way that suits you. We have transfer times as fast as 15 minutes once your loan has been approved so you can deal with your financial short fall as soon as it arises.