Most realize that payday loans are not your best option when you need fast cash, but when your options are limited due to a bad credit history and the banks won’t help, sometimes even these high interest rate alternatives can make sense.
Whether you need $100 or $1,000, these quick cash alternatives need to be used with what we like to call responsible borrowing practices. When talking to lenders, you should only borrow what you can afford. With payday loans, as the name implies, you are expected to repay on your next payday. That means the amount requested, plus fees.
For many that run into trouble with borrowing payday loans, it typically has to do with they are so concerned with the money they need now. This can be the start of their problems. When it comes to repayment, often people act surprised about what they owe. But if you work with a reputable lender, then all details about the payday loan, costs and fees should be presented in the terms before you sign. It’s important to read the terms, and know exactly what you can expect in terms of repayment in a couple weeks.
The last thing that you would want is to further damage your credit rating, and not even have payday loans as an option. There might come a time when you need the option again, and if you didn’t have payday loans or any other options, things could go from bad to worse.
If you were to start thinking long term, you might not have to use payday loans in the future. Start by focusing on improving your credit score, and putting money aside to build an emergency fund. Doing both of these are the beginning steps to creating a better financial future for yourself. If you put as little as twenty dollars aside per paycheque, in a matter of months you could have an acceptable small savings for unexpected expenses. It might even help you to avoid taking a payday loan in the future.
When borrowing payday loans, you should only do so when you have tried every other option available to you. Since they are such high interest options, payday loans should be your last choice and only considered if you have exhausted all other options.
As mentioned, the most common situation that lands people in hot water is the sheer need or urgency to get fast cash now, that people often don’t think about how they might deal with things later.
As an example, if one person earns about $1,000 as take home pay every two weeks, and most of that money is spoken for and goes towards things like rent, food, transportation, bills and similar, with maybe $100 leftover every two weeks for things that are not necessities, it doesn’t take much to derail their budget.
Now imagine they borrowed $400. It’s plain to see how they can’t afford this much, and sometimes find themselves taking another loan to pay back the first. This can lead to a vicious debt cycle that can take a long time to get out from under. Don’t make the mistake of borrowing more money than you can afford. Payday loans are a great way to cover repairs or expenses, but responsible borrowing is important to keep you from falling into debt.
In a study by MNP it was suggested that half of Canadians are only $200 dollars away from not being able to cover bills or debt payments. All it takes is one repair or emergency to disrupt the budget of many Canadians which could put them into a financial crisis.
Building that rainy day or emergency fund should be a priority for anyone that is only a few hundred dollars from a personal financial collapse. While it won’t be easy, especially if money is tight, but it is also easy to see how important it is.