AVOID Payday Loans!

By | September 27, 2015

At one time or another, most of us find ourselves falling a little short on money.  When that happens, it can be tempting to try to find a quick fix.  Payday loans can be an attractive option, but using them is rarely a good idea.  Payday loan companies can take advantage of your situation and you could soon end up in a worse financial situation than you were in originally.  Because of that, it’s important to consider all possible other options before opting for a payday loan.  Fortunately, there are things you can do to avoid payday loans.

It has been said that an ounce of prevention is worth a pound of cure.  That adage is perhaps most true when it comes to financial management.  To avoid getting into a bind, it’s always a good idea to put some money aside from each paycheque for a rainy day.  Prepare a budget you can stick to, one that includes a set amount or percentage to be saved from each paycheque.  That way, if you find yourself in need of a few extra dollars, you’ll have your savings from which you can draw.

Next, it makes sense to avoid unnecessary purchases.  If you can’t afford to purchase something in cash, don’t buy it.  Keep yourself on a budget until your financial situation improves.

If you are unable to pay some bills, you may think the only thing to do is dodge the “reminder” phone calls you will no doubt start receiving.  That’s not the case, however.  Creditors are almost always willing to work with customers to come up with a payment schedule that works for everyone.  If you take the time to contact your creditors you can make payment arrangements that will allow you to catch up.  Not only that, because you won’t need to resort to a payday loan, you will save yourself the high interest rates they charge. Here is a grea article on how to avoid payday loan scams, check it.

Now that we’ve said that you shouldn’t use your credit cards unless it is for dire situations, there are situations in which using your credit card is warranted.  Let’s say you have an electricity bill that needs to be paid or your lights will be turned off.  Using your credit card to pay the bill is a smart move, because the interest you pay on your credit card will almost certainly be lower than what you would pay on a payday loan.

If it’s a loan you truly need, a payday loan isn’t your only option and it should never be your first line of defense.  Instead, talk to your banker or credit union to find out whether they can offer you a short-term loan to help you bridge the gap.  The cost of these loans (in other words, the amount of interest you’d have to pay) is low compared to most payday loans.  You’ll end up saving money in the long run.

If you are on good terms with your employer, it’s possible that you could ask for an advance on your salary, so you get a portion of your paycheque early to enable you to cover your emergency bills.

If you aren’t comfortable asking for an advance on your salary, it might be possible to borrow money from friends or family members.  A short-term loan of a week or two (until your next payday) shouldn’t be too much of an imposition for a friend.  It never hurts to ask!

Payday loans are one of the most expensive ways to get the emergency money you need.  Before you go that route, it’s a good idea to shop around for other, less expensive options.  You may be able to get an unsecured loan from a credit union or a smaller bank.  Although you’ll pay more interest on these loans than you would for other loans such as a home mortgage or a car loan, it will still be quite a bit lower than what you would have to pay on a payday loan.

Credit card advances are typically something to stay away from, but when you have a financial emergency this can be a decent option.  Despite the fact that you’ll have to pay upfront transaction fees and compounding interest beginning the moment you take out the money, you’ll probably still come out ahead over what it would cost to get the same amount of money through a payday loan.

Consumer credit counselling services can often help you avoid payday loans, too.  These non-profit organizations can help you work on budgeting, but they can also help you to work with your credit card companies to come to a payment arrangement that makes sense for you.

Did you know that if you’re in the military, you may be eligible for certain protections?  Members of the military and their families may be able to be protected from bad practices of payday lenders with interest rate limits of 36 percent (including fees and all other charges).  In addition, payday lenders can’t require access to bank accounts or checks those protections can make a payday loan cost significantly less than they otherwise would.

Payday loans are there to help you when you are dire straits financially.  They do have a time and a place, but they should never be your first option.  No matter how tempting it is to go for these loans because of the ease and speed with which you will get your money, there are lots of great reasons to avoid payday loans.  Use these tips to help you avoid a situation where you might need a payday loan.  If the situation arises where you do need some extra money fast, it’s wise to explore some of the other options mentioned above before you opt for a payday loan.