Payday loans have been around for quite some time. Its purpose is to provide temporary relief until payday for people who have emergency financial situations. You usually hear that you should avoid payday loans at all costs. While this would be true for me, for others they can be very useful. Let's analyze the good, the bad and the ugly with payday loans
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Sometimes, you are in trouble and need additional funds to cover an invoice (that is, rent). If you have nothing to do, how do you get money to pay these bills? The answer in summary: payday loans. They can be good for you in various situations. They are the following:
- You get paid that week but you have an important bill that expires immediately
- You are about to run out of money and overdraw your accounts
- Automatic or home repair is necessary and will get worse over time
- A medical emergency is occurring and you must pay out-of-pocket costs
These situations are generally the only ones we believe would justify a payday loan. It is very attractive to request one in other circumstances, but we will discuss why you should avoid them in many other cases.
While it is quite easy to get a payday loan, you should not simply apply for one because there is one available. It is good to have money in your pocket, but it will cost. Here are some situations for which you should avoid getting a payday loan:
- Initial payment of any type of loan
- Goods or services that are priced beyond what you can afford
- Invoices that do not pressure and do not damage your credit
- Everything related to vacations and gambling.
- Simply have more money in your bank account
If you are spending money from a payday loan on any of the items mentioned above on our list, stop. Reassess what you have done and save the money as soon as possible. In most cases, these loans are at the top of all peaks when it comes to interest rates, and the "weekly" or "biweekly" payment that is made will only address interest on the amount borrowed, and not the principal (real money borrowed). What that means is that your money only goes to interest charges generated by the amount of money owed, and it doesn't really reduce the amount of money owed.
If we are in trouble, and we take a loan to cover bills while we are in trouble, but we leave the root cause unresolved (which means we don't solve the reason we had problems in the first place), we are preparing for the disaster. With some types of payday loans, you must present some type of guarantee for the cash advance. This can vary from consumer electronics to the title of your vehicle. So what happens if you lose those payments on your loan? You guessed it: the loan company takes possession of the guarantee until you are trapped or you pay the balance in full. That means they can potentially take your car. Now you are in an even bigger situation!
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If you must apply for a payday loan, pay attention to the details. Be sure to look at the fine print. Make sure payments are not interest charged. Keep collateral credit instead of using possessions such as your car or other possessions. Do not put yourself in an even bigger situation than the one that led you to consider taking out the payday loan first.
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