If you’re in a financial bind then it can be really tempting to get a PayDay Loan. Maybe you walk by a store advertising them. More likely, you realize that you can easily access these immediate loans online. It’s tempting … but it’s a mistake.
The Problem with PayDay Loans
PayDay Loans are predatory. In fact, some states have outlawed them. Most states have placed restrictions on them. Nevertheless, they continue to exist. They prey upon people who don’t have access to money before payday and feel like they need funds immediately.
The biggest problem with PayDay Loans is that they have extremely high interest rates. Sometimes they’re as exorbitant as 40%. You’re paying practically half of the loan again in interest. That’s a huge waste of your money. If you’re looking for an immediate loan, that’s probably money that you can’t afford to repay. Therefore, you end up stuck in a cycle of desperately trying to pay back your loan with the next paycheck then taking out a new loan to get you by until the next paycheck.
Therefore, it’s easy to default on a PayDay Loan. Unfortunately, that has the same negative consequences as failure to pay other loans such as credit card bills. It ruins your credit, making it even harder to get loans in the future.
Alternatives to PayDay Loans
Since these loans are so problematic, you want to avoid them. First, you’ll want to find other options to deal with your immediate financial situation. Then you’ll want to plan ahead for the future so that you never end up in this situation again.
Other Payment Options Instead of PayDay Loans
If you have access to a credit card then you should use that instead of a PayDay Loan whenever possible. Even if you have to take out a cash advance with high interest rates, you’ll probably pay less than you would pay in interest for a PayDay Loan. This is not an ideal option, and of course you’d want to try to use your lowest interest card, but it’s important to know that even this bad choice is usually better than taking out a PayDay Loan.
That said, there are some other things you should try first. Options include:
- Ask your creditors for a payment extension or the option to make lower payments. Make your bills more manageable if possible. You can often defer student loan debt, make tiny payments on medical debt, and otherwise restructure things to be able to afford the monthly bills.
- See if you qualify for a debt consolidation loan that would make your monthly payments lower so that you can handle them.
- Sell something or pawn something in order to cover the immediate cost of bills.
- Ask a friend or family member if you can borrow the money at zero or low interest until you get back on your feet. Put a plan in place to pay them back and stick to it.
- Better yet, ask them if you can get paid to do some work for them. Then you don’t owe them anything, they get something done that they needed help with, and you can pay your bills.
- Use a GoFundMe account or something similar to crowdsource money to help you get back on track.
Plan Ahead for Next Time
Once you’ve resolved the immediate issue at hand, it’s time to start getting yourself into a better financial position so that you don’t have to take out a PayDay Loan in the future. You should scale back all of your spending as much as possible. Sell items you don’t need. Take on a second job to increase income. Do everything you’re capable of doing to start spending less and earning more. Then, set aside all of the extra savings into an emergency fund. That’s what you’ll use instead of a PayDay Loan in the future.
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