It’s tough to manage your finances in the current economy. There are times when you need some cash in a pinch. One way to tide yourself over in times of need is to get a payday loan.
Payday loans are loans that are secured against your future paycheck. These are short term loans that generally charges a fee that is a percentage of the loan and a high interest rate. As you can see, this can end up costing you a good amount of money, but if you don’t have credit or means to get cash any other way, a payday loan can help you out of a jam.
You do have to be careful when you are considering a payday loan. Remember, that this is a short term loan. Also keep in mind that the fee can be high compared to other cash advance methods. Because the fee is usually a percentage of the loan that is taken out of your loan amount, many people may not consider the cost. However, when you add it all up it can be much higher than the annual percentage rate on a credit card.
So why get a payday loan?
There are times when it may be necessary to come up with cash quickly. If you know that you have a paycheck on the way that will cover the loan, but you have an emergency situation and need cash quickly, then a payday loan may be the right kind of loan for you.
Consider a few factors:
1. Do you really need the loan?
If it’s just to help pay off a few bills early, then you may want to consider some alternatives. The high interest rates will add up and you could put yourself into a revolving debt situation. If you can turn to friends or family, or even get a cash advance from a credit card or a loan from the bank, then look at those other options first.
2. Will you be able to pay back the loan quickly
Loans often take longer to pay off than people realize. However, it’s important to be able to pay off a loan as soon as possible. It’s even more important when a loan charges a high fee and interest rate, such as a payday loan. I would recommend making sure that you can pay off the loan with the next available paycheck before getting a payday loan.
3. How will a payday loan affect your credit score
Keep in mind that the lender will report to a credit agency if the loan is not paid back in full on time. This will have a negative affect on your credit score and cause you problems getting credit in the future. This then will cycle into a revolving debt situation with high interest loans.
4. Investigate your other options fully
I’ve mentioned this before, but it bears repeating. Look at all your other options. It’s frankly often cheaper to pay the interest on a cash advance from your credit card than to get a payday loan. However, there are times when there is no other option. So weigh your alternatives carefully.
With all these cavaets in mind, there are still times when a payday loan is necessary and helpful. If you run into a situation where you need cash right away and the consequences will cost you more than a loan fee, then it may be time for a payday loan.
There have been times when a payday loan has gotten me out of a financial bind. There is a time and a place for everything. I just hold to a rule that I investigate all my options to pick the most financially sound plan. Before I get the loan, I have a plan in mind on how I will pay it back quickly. (usually with my first paycheck after getting the loan) And I work on getting out of debt quickly.
When you need cash in a pinch, a payday loan may be the right option for you. Just make sure you investigate fully and keep the above tips in mind when you are considering getting this kind of loan.