All of us plan to have healthy finances. And more often than not we do. But there are occasions when we have to meet large unexpected expenditures. And that’s when our regular paycheck often can’t make ends meet. In those situations, it can be time for a payday loan.
Before you take out a payday loan, make sure you follow these simple tips.
Make Sure You Know the Penalties
Loan companies want to ensure that they get their money back. After all, it is their money. And one of the ways that they do this is to charge extra if a loan repayment is late. They do this for two reasons. One is just to make sure that the loan is paid back on time. The other is to cover the opportunity cost of not lending that money out to somebody else.
The problem comes when the borrower has to make payments that they never intended to make. The penalties and interest can add up, meaning that you end up paying back more than you intended.
Read the Fine Print
As with any important contract, it’s important to read exactly what you’re signing up for. Don’t just assume that you’ll be protected by the law. It’s likely that you won’t. Plus, going through the courts can be a time-consuming and expensive process in itself.
Make sure you check out the terms and conditions of the company website.
Only Go With Reputable Lenders
The market for payday loans is big, and sometimes dangerous. Sites like http://PersonalMoneyStore.com are reputable. But many are not.
The problem is that there are a lot of people out there who have been refused a loan before. They believe that the only way to get credit is to go to a loan shark. Often this isn’t even true, yet they feel compelled to do so nonetheless. Those who go to loan sharks risk paying far higher interest rates. And they also risk being harassed and physically attacked if they fail to pay the money back.
The best way to find out whether a lender is trustworthy or not is to read reviews online. You’ll soon get a feeling for who the responsible players are in this important market, and who is just out there to con you.
Use for Necessary One-Offs
The payday loan industry knows that they’re best off giving out loans to people when they need to make one-off payments. It’s the most sustainable business model, and it’s best for their customers.
Even their advertising reflects this. Now there’s less emphasis on handing out piles of cash for any purpose. Adverts now concentrate on the reasons why you might want a personal loan. Perhaps your car has broken down, and you can’t afford repairs, but you need it to get to work. That’s when a payday loan can really come in handy. The market sees itself more as a fallback option for unexpected expenses.
It’s not, therefore, designed as a facility for people to use every month. In fact, using payday loans every month mean that you could be paying an annual interest rate equivalent of 1000 percent. If you find yourself regularly relying on payday loans, consider making lifestyle changes instead.
Fortunately, there are a lot of websites, like comparethemarket.com that allow you to compare payday loan rates.
Don’t just assume that every company will offer the same price. Often they won’t. Every business will have a different way to measure your risk, meaning each company will have different interest rates. But don’t forget, it’s not just the interest rate you care about. It’s all the other terms and conditions that might affect your financial situation in the future.
Borrow Only What You Can Afford To Pay Back
Payday loans aren’t meant to be a surrogate for a higher income. They’re only supposed to cover unexpected short term expenses.
Take a long hard look at your paycheck and the amount that you want to borrow. Have you been living right up to your limit? If so, you may struggle to pay back a payday loan, even if you’ve taken one out for all the right reasons.
You might find that your only option is to reduce the amount that you are spending each month. That means cutting out things like meals out and traveling to see family.
It’s not all bad news, though. Often the pain is over in just a few months; once your finances have had time to heal. And that’s when payday loans can genuinely be considered a success.