Pay day loans can be a costly form of borrowing if used incorrectly, especially when the interest rates can be in the hundreds, but there are some reasons when a pay day loan is a good option for you. Short term loans are exactly that, loans for a short period of time, which is where a lot of people get caught out. They should not be used for frugal reasons, such as getting a new outfit. They are however there for times of financial emergency and when the repayments will be less costly to us than other options, especially if we are looking for bad credit loans.
Here are the reasons a pay day loan can help us and the right way to use them.
You have a financial emergency.
Take this scenario, your car breaks down, it will cost $200 to fix which you don’t have. Sound familiar? Well what if you need that car for your work and so by going without you will lose money in lost wages. This is exactly the time a pay day loan can be the perfect choice, you will have to pay the upfront fee, usually around $15, but then you can get the repairs done sooner rather than later.
It is these kind of unexpected emergencies that we can look into short term lending as they are quick fix scenarios that won’t encroach month upon month, on your finances.
It will cost you more money not taking out a pay day loan.
There are times when we all run a little short before our next pay check, and this is fine if you have paid all your bills. However what about when an unexpected bill arrives and you were $100 short? You have 2 options, pay the bill late and incur late fees and a default on your credit history or you could chose a pay day loan to cover the $100 until your next employment pay. This way you are cutting out late payments and the fees these will incur and borrowing a manageable amount that will be easily repayable.
If you have done your research and set out a plan for paying the loan back.
When taking out a loan of this kind, research is of the uppermost importance. You need to look at why you need to borrow money, how much the total amount repayable will be (the amount lent + the interest), and how you are going to pay it back. Whatever the reason is for needing to borrow, you must have an answer to the above before you sign on the dotted line.
A common mistake when using this type of credit is not meeting the payment in full when you receive your pay check. This can then lead to taking out further credit to cover the debt. Once in this cycle it can be very difficult to break and you will lose sight of why you needed the loan in the first place. By having a plan from day one, you will know how much you can afford and when you will be able to make the payment. This will help you to find the right lender for you and lead to a happier financial future.