30 August, 2013: Payday loans make sense for many people. Although the loans get a bad rap in the press, they are incredibly helpful when used correctly. Like any loan, payday loans have their pros and cons. Understanding these loans helps you make the right decision for you and your family.
Why Use a Payday Loan?
Payday loans are helpful when you need cash in a hurry. Once approved, the money from these loans is typically placed into your bank account within 24 hours. A short-term loan is not useful when you want a new television or need a new outfit for an event.
Help Paying for an Emergency
Different people consider different events to be emergencies. If you need help paying for car repairs, paying for medical bills or you are facing a utility shut-off, a payday loan was made for you. These loans provide additional income that helps you pay the bills when you need help the most.
The Problems with Payday Loans
Payday loans are meant to be a short-term solution to an immediate problem. People run into difficulty when they do not pay off the loan as quickly as possible. When a payday loan is accepted, it is expected that it will be paid back with the next paycheck. People who take out payday loans without the ability to pay them back are the reason these loans have gotten such a bad rap.
How to Use a Payday Loan Wisely
There are ways to make a payday loan work for you in the most beneficial way. Here are tips for using a short-term loan wisely:
1. Take Only What You Need
If you need $100 to get you through until next payday, take only $100. The lender that you choose may offer you more than what you apply for. If what you are offered is more than what you need, resist the temptation to accept the entire loan. Remember that you will be paying the loan back, plus fees and interest, with your next paycheck.
2. Look for Rates and Fees
Payday loans come with fees and interest rates. Read the fine print before you agree to accept money from any lender. Understand that if you accept $100, you may owe between $130 and $150 on your next pay date. Know exactly what you will be expected to pay back before you take a loan.
3. Do Not Extend Your Loan
Extending your loan is easy to do. Do not get sucked into a vicious cycle of extending your loan in order to avoid repayment. If you choose to extend your loan, you will be responsible for an extension fee. Your loan will then renew itself, in full, until your next pay date. Extending your loan several times can easily result in you paying three to four times the original amount of the loan.
Payday loans, when used correctly, can be the answer to problems for which you need immediate assistance. These short-term loans are meant to be used as an aid, not as a crutch. Don’t believe every negative thing that you hear about payday loans; a short-term loan may be exactly the assistance that you need.