The Dos and Don’ts of Using Payday Loans
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Payday loans are fast, convenient and easier to secure than ever before. They’re also risky for borrowers who don’t approach them with sufficient restraint. However, many financial experts agree that this is a viable way of securing emergency cash on a tight turnaround. In other words, payday loans have their place in the lending pantheon. The key is to know how to approach them. With that in mind, have a look at these DO’s and DON’Ts for using payday loans:
- DO tell the truth.
When you are applying online for a payday loan, it only takes a few minutes to receive approval. This misleads some would-be borrowers to believe that the lending company is not actually verifying their financial claims. Make no mistake: lenders will follow up on your information to make sure that you were telling the truth, and if you blatantly lied to secure a higher-dollar figure, they are going to put your name on a blacklist and circulate within their network of agencies. This is not a savoury position to be in.
- DON’T borrow more than you need.
The process of borrowing money like this is so quick and painless, and it’s easy to convince yourself to borrow more than you need. Just remember, the fee that you pay on top of the loan is determined by how much you borrow, so borrowing an extra $100 that you don’t need is going to cost you a fair bit more when you pay it back. You’re better off borrowing only what you need and not a cent more.
- DO consider a payday loan to help with an essential emergency expense. The beauty of a payday loan is the ease and simplicity of the process. These days, you do not even need to walk into a physical store, as personal loans are widely available on the Internet. The fees attached to these loans are steeper than the interest rates attached to traditional loans. With that in mind, payday loans are at their best when the unexpected strikes – e.g. an emergency breakdown or surprise hospital bill.
- DON’T use a payday loan to repay a previous loan.
This is an easy trap to fall into, but it rarely works out in the borrowers favour. It’s a slippery slope that leads borrowers into a downward spiral of debt. At some point, you’ll need to stop the borrowing cycle in order to get out of this predicament, and the only way to do this is to cut spending so that the money that you have this month is enough to cover your expenses. It only takes one successful cycle to stop the debt from mounting.
- DO insist on borrowing only from reputable (i.e. registered) lenders.
When you are dealing with online lenders, it is more difficult to ascertain the quality and reputation of the agency that you are dealing with. You owe it to yourself to insist on the very best here, so perform your due diligence and insist on borrowing only from registered lending companies in your region. This ensures that you have a path of legal recourse should a problem arise.
- DON’T use a payday loan for recurring, everyday expenses.
Payday loans are best leveraged when an unexpected expense presents itself. However, these short-term loans are dangerous when you start using them for everyday purchases such as food, petrol and rent. However, the Pew charitable trust foundation found that nearly 70 per cent of borrowers do just that. By comparison, only 16 per cent used the financial service for an unexpected expense. In other words, most people are ignoring this important pearl of wisdom. Don’t be one of them.
- DO repay your loan on time.
A payday loan is designed to carry borrowers through a rough patch – and usually a brief one, at that. Different lenders offer different repayment schedules, and this should always be clearly outlined before the transaction is complete. In many cases, the lender will draft the money directly from your bank account on an agreed-up date. Make absolutely sure that the money is in the account on that day. This avoids penalties from the borrower and overdraft fees from your bank. About the Author: Morgan Finance in New Zealand is a reputable provider of lending services. You can find information about their requirements when applying for personal loans on their web
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Category: Loans
