Wednesday, December 31, 2014

Effective Use of Payday Loans


Payday loans are one of the most popular type of finance commonly arranged online, and this popularity is in many ways perfectly understandable. They're quick to arrange and you can often have the money in your account in a matter of hours if your need is urgent enough. There's also generally no credit check during the approval process, and so people with damaged credit ratings need have no fear of their application being rejected.

That said, payday advances can also be something of a mixed blessing. There's no denying that they're one of the more expensive forms of credit around, especially if you translate the charges into an annual interest figure like APR. They can also lead to financial problems in that a chunk of your next paycheck will have to be used to repay the borrowing, and if things are already tight financially then this extra strain can easily lead into a vicious circle of needing to take out credit to repay previous credit - in short, this is a route to financial chaos and even insolvency.

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However, that's not to say that you should steer clear of payday loans altogether, When they're used as intended, as a quick fix for a temporary lack of money, then they can be very useful indeed. You just need to make sure that you use some common sense before applying.

Firstly, don't just make an application with the first company you come across. Although no payday loan provider is likely to be actually inexpensive, there are differences in the scale of fees that they charge, and these differences could be vital to you when the time comes to repay.

Once you've found a lender who appears to offer a decent deal, decide on exactly how much you need to borrow to get you through the current crisis, and borrow only this amount. You should try to make the loan as small as possible, Don't be tempted to add in a little extra as 'fun money' - as these kind of loans are so expensive, that is a luxury that you definitely can't afford.

When the time comes to repay, it's obviously the best course of action to clear the debt and move on, but this isn't always realistic. Payday loan companies usually make it extraordinarily easy to extend or renew your loan, and it's tempting to do this rather than bite the bullet and clear the debt. Unfortunately, this will incur a new set of fees, and in this scenario we're heading perilously close to the vicious circle of borrowing mentioned above.

If you really feel you have no alternative but to borrow again, at least try and reduce the amount you borrow, even if only by a little, so that you can try and wean yourself off this expensive source of cash. Over time you should aim to steadily reduce the amount you're borrowing until you escape the need altogether.

Finally, should you find yourself a regular customer of payday loan companies, that's a clear sign that something is wrong in your finances - but then again, you probably already knew this. Taking a close look at your spending habits and reducing them wherever possible will stand you in good stead for the future if it means that payday loans are only considered in an emergency and not as a routine part of life.


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