When struggling with debt and too many expenses, a payday loan can be your way out of your economic issues. Whether you have to buy food, pay rent, or childcare – there’s no doubt you need cash to make it to the end of the month.
Yet, payday loans are expensive, due to the fact that you get the money fast and without a ton of paperwork. For you, what may seem like a lifesaver today will turn into a money eater next month. Plus, if you don’t take time to check the lender, you’ll get yourself in high interests rates. This means you’ll pay a lot of extra money to clear your debt spend time repairing your credit.
But, bad times ask for tough decisions. If you’ve decided to use a payday loan to get some cash, you need to pay attention to all details before signing that check. Read these five tips on how to be a responsible payday loan borrower:
Never Borrow More than You Need
Start with simple math. How much do you need to survive until your next paycheck? Make sure you write everything down – rent, food, bills, gas. Try to be as specific and clear as possible. Estimations can make you borrow more money than you actually need to survive.
Generally, for every $100 you get, you’ll have to pay between $15 and $30, depending on your lender. So, every dollar you manage to save can help you reduce interest and fees. Which means you get to pay less from your next wage.
You don’t need to borrow money for a possible future emergency. You’ll handle that issue when the time comes. Borrowing money just to have some extra cash on hand is foolish, since you’ll end up spending it anyway. Plus, you’ll have more money to return when the deadline comes.
Try to Postpone Any Expense
Payday loans give you the advantage to get the money fast and without too much paperwork to fill out. The price to pay is high interest and fees. So, there’s no real deal behind this source of cash. If you have any possibility to postpone payments until you find an alternative source of money, you should do it. Negotiate with creditors – some of them are willing to work with you and refinance your credit.
Payday loans can generate vicious cycles. Getting out of debt is going to be harder than you think and can bring negative effects on your financial future. If you can’t pay by the day of maturation, you’ll have to consolidate your payday loan with another payday loan. Most of your money will end in paying fees and interests, without even covering your initial debt.
Try to identify the expenses that can wait one or two weeks – or until you get your paycheck. This way, you get to use the money you have for urgent payments and save yourself the stress of dealing with payday lenders.
Reduce Regular Expenses
Unexpected medical expenses, car repairing bills, or emergencies can turn your life backward in terms of financial safety. But, most of the time, they’re not the main reason people need to find extra cash to pay their bills. 69 percent of people who take out payday loans need the money to pay regular expenses – such as food, rent, or credit card bills.
So, a good method to become a responsible payday loan borrower is by budgeting. Try to keep track of your monthly expenses and to quit on those things that you can’t afford at the moment.
Try to change your current contract for phone, cable, and internet. Most of the premium services you’ve signed for are worth way less than what you actually pay – especially if you work extra hours and don’t even have the time to turn on the TV. Contact providers and try to negotiate less expensive contracts that could save you money for essential expenses – like food, transportation, and childcare.
Always Look for Alternatives
Before thinking of getting a payday loan, make sure you’ve checked all other opportunities to find cash. Family, friends, the emergency fund, or an advance from your following wage; any of these sources is better than a loan.
If you’re forced to take out a payday loan, analyze multiple offers before signing a contract. Check companies and take time to calculate the real interest you’re signing for. New regulations force payday lenders to keep interest under 100 percent, which means the sum you pay for interest and fees can’t be higher than the one you’ve borrowed.
Yet, the law can’t force lenders to keep interest low. Average credit cards interest rates (APR) stay under 16 percent, but this isn’t true for payday loans. Furthermore, when taking out a payday loan, you also agree to pay fees that add up to your initial debt.
When you calculate the sums to pay, make sure you consider the worse scenario – in which you don’t get to clear the debt in time. To learn everything about payments and fees, read more information on payday loans here.
Read Twice the Terms and Conditions BEFORE Signing
Terms and Conditions are the trickiest part when borrowing from lenders. Make sure you read and understand everything before you sign. Interests and fees vary with every payday loan and they’re written in your contract. Once you’ve signed, there’s no way to go back and cancel the agreement.
Payday lenders can include items in your contract that could cause you problems in the future. Don’t let yourself trapped by specific terminology. Choose a company with a clear contract, written in terms that you can easily understand. Make sure all sums are correct and that the contract specifies the date your payment is due. This is something you want to be careful of – so don’t take it lightly.