Deciding Whether A Payday Loan Is Right For You

Deciding Whether A Payday Loan Is Right For You



Deciding Whether a​ Payday Loan is​ Right For You
Payday loans are often touted as​ a​ quick fix for a​ bad financial situation,​ letting you​ bridge the​ gap between running out of​ money and your next wage or​ salary coming in​ .​
The basic idea is​ that you​ can borrow a​ small amount of​ a​ few hundred dollars for a​ short period of​ a​ week or​ two,​ and repay the​ debt next time you​ get paid.
This sort of​ service can indeed be very useful if​ you've run out of​ cash for living expenses,​ or​ if​ you're faced with an​ unexpected bill or​ expense that you​ simply can't cover when you​ need to,​ but are payday loans always the​ good choice they're presented as?
First,​ we'll take a​ look at​ the​ undeniable advantages of​ these loans,​ before looking at​ the​ disadvantages,​ and possible alternatives you​ may be able to​ use if​ you​ decide a​ payday loan isn't right for you.
The lending criteria for payday loans are very generous indeed,​ and almost anyone who's employed and has a​ suitable bank account will likely be approved .​
This means that even people with terrible credit ratings should be able to​ get a​ payday loan,​ despite being rejected for nearly any other form of​ finance.
They are also easy to​ arrange,​ and you​ can often get the​ money in​ your account in​ a​ matter of​ days .​
Some lenders can even arrange an​ overnight transfer of​ the​ loan straight into your account the​ very next day,​ which is​ obviously very useful when you​ need cash in​ a​ hurry.
Finally,​ once you've been approved for your first loan,​ it's usually a​ very simple matter to​ 'refresh' your loan again if​ you​ find you​ need to​ make use of​ the​ facility if​ funds are again short in​ the​ future.
There are,​ however,​ two major downsides to​ payday loans which you​ rarely see mentioned in​ the​ advertisements and web sites promoting them .​
Firstly,​ they're very expensive compared to​ other forms of​ credit .​
Because the​ term of​ the​ loan is​ so short,​ a​ fee of​ 20% of​ the​ amount you​ borrow - which is​ about standard - will work out to​ be an​ eye-wateringly high APR.
The second problem is​ closely related: because they're so expensive,​ you​ can easily be left short of​ money the​ next month once you've cleared the​ loan and paid the​ fee .​
In this scenario,​ it's just too easy to​ refresh your loan again to​ cover the​ shortfall,​ resulting in​ more fees,​ and a​ never ending cycle of​ borrowing.
So,​ if​ you​ decide that a​ payday loan isn't a​ good choice for you,​ what alternatives do you​ have? the​ first one is​ making use of​ a​ credit card,​ if​ you​ have one .​
While credit cards are usually also pretty expensive forms of​ finance,​ they do allow you​ to​ spread the​ debt over a​ number of​ months rather than needing to​ be repaid straight away along with a​ fee.
Many bank accounts now offer an​ overdraft facility,​ which can also be used to​ cover a​ short term lack of​ money .​
The interest rate on​ an​ agreed overdraft is​ likely to​ be better than that of​ a​ credit card,​ but your bank may not approve your application .​
Beware of​ going ahead and overdrawing without your bank's agreement,​ as​ the​ charges they will levy in​ this case will be very expensive.
If neither of​ these options is​ available to​ you,​ and you​ have no other way of​ getting hold of​ money such as​ borrowing off family,​ then a​ payday loan may be the​ best option .​
Just ensure that you​ use it​ properly,​ and heed the​ warning sign it's giving you​ about the​ longer term state of​ your finances.




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