How To Use A Payday Loan The Right Way

AdminBy AdminOct 28, 20170

Payday loans are historically maligned, derided in the press as bad for the poor. They’ve been called exploitative, and some legislators have attempted to stop companies from offering them. It’s true that payday loans have the potential for misuse. Desperate people taking these loans can get into financial trouble if they aren’t careful.

Still, there are ways to use a payday loan to your advantage. These rules will help you avoid the common pitfalls that cause so much consternation over these loans.

Don’t Extend Or Roll Over Your Loan

Don't Extend Or Roll Over Your Loan

One of the ways payday loan companies make money off of clients is by offering the opportunity to roll the loan over to the next month. You simply pay the interest and earn an addition 30 days to pay off the principal of the loan. Extending these loans is kicking the can down the road.

You may not have the money to pay the loan the next month, putting you in an endless cycle of debt. Avoiding this requires you to understand your situation completely. Only take these loans if you’re certain you have the ability to pay it off within one month.

Use Payday Loans When Not Having Money Has Greater Consequences

Use Payday Loans When Not Having Money Has Greater Consequences

There are times when not having a certain amount of money can have dire consequences. If you miss a payment on a credit card, for instance, causing your credit to sink, you might pay long-term financial costs that far outpace the interest on your payday loan. These are the times it makes great sense to use payday loans. While you should still have a plan for paying off the loan, don’t be afraid to buck the trends and take a payday loan when doing so will save you from long-term difficulty.

Link The Loan To Your Bank Account

While not having the money to pay a payday loan is one concern, not having the time to pay a loan in person is another major concern. Payday loan obligations shouldn’t take you away from work, your family, or other things that are important in your life.

Look to set up a direct debit option with your bank account. This brings two distinct advantages. In addition to making things more convenient, it forces you to budget appropriately for your monthly obligation.

Communicate With The Payday Lender If You’re Having Trouble

Communicate With The Payday Lender If You're Having Trouble

Some payday lenders are surprisingly willing to work with clients when those clients have financial difficulty. In most cases, people struggling to make a payment will avoid their lender, falling out of communication and making a bad situation worse.

If you know you’re going to miss a payment, you should call the lender and discuss it. They may be able to work out a deal with you that will help you avoid negative credit reporting. In the end, payday lenders want to get paid, too, so it makes little sense for them to abandon you if you’re willing to work with them.

Conclusion

Payday loans present certain financial risks to consumers, but when used correctly, they can be financially helpful. Make sure you have a plan when you take one of these loans. The worst thing you can do is get caught in a cycle, borrowing each month at high interest from a different lender to pay off an obligation from a lender across town.

Use these loans when you have to and when not having money has worse consequences than the admittedly high-interest rate on payday loans. If you’re smart and responsible with payday loans, you can save yourself the trouble many experience.

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