I was reading a blog of one of my friends the other day and in his latest post he had admitted to using one of the payday loan providers loan to pay a bill.
I was really surprised because he had a well-paid job and from the conversations I’d had with him, and from reading his blog, I knew he was a smart guy. We had even got to know each other in a personal finance forum that taught good money management techniques!
I was surprised, yes, but while payday loans often get a bad reputation, I had to admit they are a great solution for a certain person in a certain situation. If you find yourself in need of cash immediately you can take out the amount that you need, use it and pay it back with your next paycheque.
But it’s really important not to get caught in the trap of using this as a consistent way to make ends meet when you don’t have the cash you need.
Check Your Reasons for Getting the Loan
Here are a few rules to keep in mind as you consider the use of payday loans. For more information on payday loans and other financial products, check out Money Supermarket.
Payday loans are for emergencies. When everything in on the line and you know that there will be real consequences if you don’t have the cash, it is time to check out a payday lender. If you find yourself consistently requesting money and paying it back later, look at some other long-term options that could be more helpful including budgeting or a credit card. Considering other options available, this is a costly way to borrow money. The fees alone make this an emergency situation only option.
Don’t Overextend Yourself
You are in an emergency and you need cash, so how much should you borrow? You don’t want to overextend yourself financially. Take out only what you need and only what you are going to be able to pay back. It can be tempting to see this as a credit line that you can borrow against but remember that there are fees associated with the loan. Get only what you need to keep your costs down.
Pay the Money Back as Soon as Possible
Unlike a credit card, you don’t have much time to pay back the payday loan. In most situations, you have two weeks or less to get the money that you borrowed back as well as any fees that you owe. Don’t borrow with the expectation of taking your time to pay it off sometime in the future. If you are late, those fees are going to steadily increase and you may find yourself sinking financially.
Look Over the Paperwork
The concept seems simple: you need money. A payday loan company lends you money. You pay the money back. But is not that easy. There are fees for borrowing the money, requirements for when and how the money must be paid back, fees and consequences for paying late. Even if you are planning to pay the money back right away and you think you know how much the transaction is going to cost you, read the fine print and ask questions if there is something you don’t understand.
If you are in a panic for cash, you may just want to head to the closest payday lender and get some cash. Before you walk out the door or enter your information online, take some time to look at all of the companies available to lend money. Some may have lower fees and more flexible payment plans. Every company is different and you want to be sure that you are paying the least amount of money possible to borrow from a payday lender.