Payday loans can help when you have bad credit and unexpected emergencies, especially when you don’t have other options when you need fast cash.These tend to be high interest loans because they are for people with bad credit, which lenders consider to be high risk of not repaying or defaulting on their loans. As many as one out of every four or five skip on payday loan payments, and lenders have to account for this, which is why rates are much higher than installment loans or personal loans.

If you’ve always pawned anything of value, tried friends and family, the bank isn’t an option, and odd jobs or other methods won’t provide funds fast enough, sometimes a payday loan might be the only option. While it won’t happen overnight, let’s explore some ways that could put you in a better financial position in the future with a little planning.

Build an Emergency Cash Fund

If you want to avoid payday loans, the first thing you might do is focus on building a small nest egg or rainy day fund of emergency savings. If you were to put at least $40 aside per month, you’d have four hundred dollars for when unexpected expenses come along. 

If you can afford more, save more. Look at unnecessary expenses or ones you can do without, so that you might be able to put more aside faster. Can you trim expenses, do without subscription services or something else for a while? Finding $10 here and $20 there can all quickly add up to help you reach your goals faster.

Life can throw a curveball at almost any time, and having funds for a repair or whatever you might need quickly can provide peace of mind. 

Building Your Credit

One of the main reasons that you are left with few options other than payday loans is that you have a poor credit history, and most lenders don’t want to take a chance on someone with bad credit. This might not seem obvious to some, but if you start improving your credit now, you will definitely appreciate it later. Whether you want to get a better interest rate for a car or electronics or something else, having fair to good credit definitely opens new possibilities. 

A starting point is to know where you currently are, and searching online for terms such as a ‘free credit score in Canada’ will provide you with some options to get the info. Once you’ve established your base line and know your score, you now know what you have to deal with. 

A big part of your credit score is demonstrating what they call creditworthiness. This is another way of saying that you are dependable and can be trusted with credit. Your credit score is based on a few factors like credit history, amount of used vs available credit, length of history, along with inquiries to your credit rating/score and records of things like collection issues, bankruptcy or similar.

The first thing to do is look for errors in your credit report, and dispute them if you find any. After that, it’s important to ensure you always pay any bills or loans on time to avoid negative reporting towards your credit score in future. Depending on your current credit score, you might consider what is referred to as a ‘credit builder’ loan, so that you might slowly improve your rating over time. Some diversity in your borrowing can also be good, and when you’re in a good position to do so, you might try applying for a credit card. There are some that will work for people with bad credit, and if you manage to make on-time payments, this can also help your credit score. 

Improving Your Odds

There are also other options for reporting positively to the main credit bureaus such as rent, mobile payments and even utility bills. A late payment should be avoided at all costs. Some have been known to take a small payday loan to pay bills in order to protect their credit score. A late payment could knock your score down as much as a hundred points, although it depends on many factors. But the thing to know is that it can take many months of proper on-time payments to recover from one late payment.

You either have the funds on standby or improve options for borrowing, which are often linked to improving your credit score. The smartest move of all would be to do both. 

If you find it difficult to put money aside and live paycheque to paycheque, another consideration for your long-term benefit is changing your current circumstances. Some will say it is easier said than done, but with a plan, you can accomplish this. There’s a number of ways to consider, but the most straightforward for most can come down to this; the more you learn, the more you earn. So if you were to attend a school or college for a diploma or certificate, you might be able to apply for jobs where you could earn more in the future. You’re never too old, and it’s never too late.

Hopefully, the above advice helps you to avoid payday loans and improve your own personal finances or situation so that you can live life to the fullest. Making smart decisions, sometimes to make up for poor choices in the past, can really turn things around for some. But one thing is for sure, if you don’t come up with and stick to some kind of plan, nothing will change.