A payday loan can seem like a quick and easy solution for a short-term hiccup in your cash flows. And in the right place at the right time, a short term loan to stretch your cash until the next pay check is just the answer.
But as with any form of borrowing, payday loans have risks and traps, and of course all borrowed money comes at a cost. The cost of a payday loan over the short term, which is what they are designed for, is not very much, and can be compared to the cost of a taking a taxi ride. Like a taxi - payday loans are VERY expensive for a long trip - but justifiable for the short haul on an occasional basis.
So, regardless of what a lender may tell you, if you think you may need to keep a loan for longer than (say) 4 weeks, or two to three paydays, then you should be thinking about other ways to meet your funding needs. If you have a long-term need, or insufficient income to make short-term payments, these are good reasons to avoid getting a payday style of cash advance.
But what are the alternatives? It's easy enough to recommend avoiding payday loans because of the cost, but not so easy in practice. However with a bit thought, and hopefully after reading this, you can explore alternatives before jumping for a payday loan.
If you have a debt problem , meaning your income is simply not enough to cover your outgoings, then a payday loan is not going to help, in fact it will only make your situation worse. So get proper advice, make use of debt counselling services which are either free or low cost, for example see http://www.debtadvice.org
If you have access to a credit card, it can have significant advantages over a payday loan, and is more suitable for a longer period. Take advantage of zero rate balance transfer deals, flexible re-draw ability, lower interest rates (lower than payday loans) and minimum monthly payment requirements. But also keep in mind that there are penalties for late payment, and you should have a realistic re-payment plan in mind. The longer you keep the money, the more it costs.
Approach Your Employer
Why not ask your employer for a paycheck advance? If it's a true advance of earnings to you, it should come at zero or very low interest cost. If you can get it, it's cheaper, and should be less hassle than a payday loan agreement.
Approach Your Creditors
Almost any responsible lender or business operator will be glad to hear from you before you default on a payment rather than after. If you owe money and can't pay it all right now, approach your creditor with an offer, and a realistic payment plan. And then do your utmost to stick to the plan, or if you can't, get back in touch to re-schedule your payments. Why would a creditor agree to this? - because the alternative is likely more expensive, and more hassle. The effect of a payment extension is that you've "borrowed" the money, often interest free.
There are some lenders who compete in the same space as payday loan lenders. Not so many - but it's worth checking in your area if you want to avoid a higher cost payday loan. They will include some Credit Unions, some finance companies, and other companies offering loans specifically for military personnel, all with loans an substantially reduced interest rates, and possibly longer term than a normal payday loan. Take the time to check.
Religious and Social Service agencies
If it's a true emergency, check for services in your area. Naturally you would expect eligibility (e.g. income, nature of need) requirements to apply.
Prevention Is Better Than a Cure!
Get a budget! This is of course, after the horse has bolted, and you probably don't want to hear this right now. But if you want less stress and less borrowing costs, serious about a family budget and stick to it. Regardless of income, you can get ahead by living within your means, and by providing a small amount out of each pay as a saving for emergencies. It doesn't have to be a fancy detailed number-crunching exercise - just work out what you need to live on, quarantine that money from your pay into your spending account and save the rest. Save enough to cover emergencies e.g. $10 per week. It won't be fool-proof, or prevent the big disaster, but you might be surprised at how quickly your life will improve.
So next time, before you rush out for a quick, easy and expensive payday loan, just pause for a minute and seriously consider your alternatives.
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