The Right Way to Use a Payday Loan
I’m going to tread rather carefully here because I know that a lot of people consider the quick payday loan businesses to be loan sharks and all predatory lenders. I can see where they are coming from, but I can also see that there is a real use for this type of service.
Let’s look at two ways to use a quick payday loan as a possible alternative. Basically there’s the right way and the wrong way to use a payday loan service.
The Right Way
The right way to use a payday loan is when the cost of not paying your bills on time would be greater than the fee for getting the cash early and paying a small fee back to the payday loan company.
Let’s say for example that the timing of certain bills and your paycheck is off. So if you wait until payday you’ll have to pay an overdraft fee (or bounced check), as well and 2 or 3 late payments on certain bills that you owe. Maybe these total fees amount to $50 extra that you’ll have to spend.
So in this situation if you could get a quick payday loan to cover the bills, avoid late payments and overdraft of bounced check fees, and then pay less than a $50 fee it might be worth it. Of course don’t take a bigger loan than you need, but this is one example of how to get a quick payday loan could be helpful.
The Wrong Way
Where I think a lot of people get into trouble with payday loans is that they try to use them more like a credit card or other form of long term credit. Payday loans help because you get the cash fast, but you also have to pay it back fast as well. So if you’re looking to get some furniture, don’t do it with this type of loan! Get financing from the store if you have to, but don’t use a payday loan.
I really do think that this is where people get in trouble with these loans. They don’t have to get something right away, but they really want it. So instead of using some discipline and waiting until payday they go get a loan and then forget about it. This causes them to pay extra fees and get nailed by the payday loan company.
Payday loans can be a good option in certain situations, but make sure you never take out more than you’re going to get in your paycheck and preferably much less. Don’t use them for extraneous purchases, but mainly to cover bills that would cost you more if you didn’t pay them off right away.