Payday loan companies aren’t new to getting blacklisted due to their negative reputation. No financial expert encourages these loans and who can blame them? Firstly, payday loans have high-interest rates that can eat up your money and spiral you into debt. Secondly, they tend to have hidden fees. Thirdly, most payday lenders are notorious for their aggressive lending and collection practices. And lastly, taking out payday loans aren’t a financially smart decision in the long run.
But if payday loans are a mischief, why do companies that specialize in these services still thrive? Because there are a lot of people who need them.
Nightmares occur when you’re not wise about taking out a payday loan or you’ve encountered an unscrupulous lender (or both). Payday loans are designed to cover unexpected expenditures when emergency situations arise. They are meant to provide you with a short-term relief during your financial hurdles, and not the other way around.
If you make good decisions, you can get payday loans without going broke. Let’s be clear – we’re not encouraging you to acquire them if there are other low-interest alternatives. But if they are your last resort, here are some smart ways you can make use of it without getting used.
1. Do you really need it?
Like, really REALLY need it? Don’t get payday loans unless you do.
Do you need to pay off a necessary expense ASAP? Don’t you have time to wait for the bank to approve your personal loan? Can’t you get an advance from your employer? Can’t your credit card cover for it? Do you have a poor credit history, hindering you from getting approved for other loans? Do you find yourself in any of these situations?
There are a lot of factors why people hold on to payday loans. It’s advised that unless the expense is urgent and you can’t obtain other loans, try to consider alternatives.
2. What is your payday loan for?
Again, payday loans are extremely useful in the case of an emergency, like hospitalization. Since they have exceptionally high levels of interest, it won’t be a smart move to use it to cover general living expenses or to splurge on instant gratifications, like shopping, gambling, vices, and extravagant celebrations. Don’t forget that every dollar you spend shall be repaid on your next paycheck.
Use payday loan services only if it’s necessary. Before you take out a loan, always ask yourself: is securing a short-term loan with hefty interest worth it? If you don’t assess the problem, you end up digging yourself a bigger hole than getting yourself out of the debt pit.
3. Is your payday lender the one?
Keep calm and choose your payday loan company wisely
Once you type “payday loans” in the search box, a number of loan companies will immediately flash before your eyes, all competing for your attention. Don’t let the pressure of raising cash fast get you into making wrong decisions.
Don’t simply head for the first payday loan company you see. Shop around for options. Consider their reputation. Seek recommendations. Read reviews. Looking closely into a dozen of options won’t just save you from pesky rates but also give you the best customer service.
4. Are you paying attention to details?
Always read the fine print associated with your loan agreement to discern whether or not you should continue. Understand the breakdown of what you’re going to pay for at the end of your agreement. Clarify the specific due date of the repayment. Look out for the “hidden fees” that come with your loan. Ask about their penalty charges in the event you cannot settle your dues on time. One of the biggest criticisms of payday lenders is they lack transparency when it comes to late payment charges so you really have to ask.
5. Can you afford it?
After reading the loan agreement, look at your income. Will you be able to make sufficient money before the due date comes? Will you still have enough budget after your paycheck has been used to repay the loan? If you have low income, or if your pay dates aren’t fixed, it’s a no-brainer to not take a risk or you’ll find yourself swimming against the rising tides of debt due to overlooked agreement and reckless decisions.
6. Are you aware of their manipulating tactics?
Payday lenders have been scrutinized for their intrusive lending and collection practices so don’t be a victim.
Some companies can manipulate you. They love it when you keep paying only the minimum or when you ask for extensions, thinking these are smart ways to gradually eliminate debt. The truth is you’re being dragged to the point of not being able to pay back the loan. In the event you default, they have belligerent collection practices. They may call you or your family and threaten you with garnishment of your wages to force you into repaying.
7. Are you taking out multiple loans all at the same time?
Don’t use multiple lenders at all costs. Using several lenders is an entirely inappropriate practice. In some cases, it’s against the law and it’s a surefire way to leave you with a sum of debt that exceeds your monthly salary. You should only secure one single loan against any given paycheck.
Robbing Dave to pay Steve is also never a good idea. Although it’s not technically illegal to secure a loan from a new company to pay an existing balance, it doesn’t help to break the tedious cycle of debt.
Author Bio: Ina Salva Cruz is one of the daytime writers for Speedy Money Payday Loans, an Australian-based business, providing short-term borrowing solutions. Like other young adults, she’s focused on getting a head start on her finances and she loves to write about wealth-building tips for millennials.