Payday loans are the remedy, not the malady

What ails us?

Thanks to some unreasonable and unjustified bad press, payday loans have come to be regarded in some quarters as a bad thing for consumers. Basic principles of economic science say that if we, as individuals or as a nation find ourselves in sudden monetary troubles, more often than not, it’s because of some flawed practices and policies that get entrenched in our behavior over a period of time. Gradually, such behavior leads to a crisis and that’s what we face today. Payday loans are not the source of the crisis, they are a small but very powerful tool to help you in overcoming any such crisis in your life.

The purpose of payday loans

Payday loans are designed in such a way that they take care of the following extremely important aspects:

• Payday loans or short term cash advances are extended to you against your next monthly paycheck. So in essence they are meant to be very short term, so that you can take care of your normal or urgent expenses in a very convenient and easy way. In the present recessionary situation, with pay cuts and job cuts looming over all of us, this is not an extraordinary situation to be in.
• Also, considering the prevalent reluctance of banks to lend money for personal loans, due to a variety of reasons like the credit crunch or your bad credit ratings etc, payday loans in contrast provide an easy way to fulfill your monetary needs in these times when other sources of credit are drying up.
• So basically payday loans are designed to act as a shield; to protect you and your loved ones against any sudden monetary shock(s). In that sense they are nothing short of a blessing.

But where do problems start?

So you are asking, if payday loans are all that good, then what about all those articles that you have read warning you about the so called ‘hidden traps’ that lie in them? Well, the problem lies partly in our spending habits that have been ingrained into us from so many decades of prosperity. According to Demos, a firm that specializes in public policy research, the general credit card debt leapfrogged by 315 percent during the period between1989 to 2006. This shows that availability of easy credit has made us more and more dependent on it, playing havoc with our saving habits. This has got to change. Payday loans are not meant to make you dependent, they are meant be used as quick fix and easy solutions to your immediate fiscal problems. However, for that to happen, you must be responsible enough to plan and utilize your cash advance with good helpings of intelligence and accountability

What must you do with your payday loan?

• First and foremost, the amount of the payday loan that you apply for should correspond directly to your current needs for which you need cash. E.g. if you are short of cash to pay off your electricity bill, then take out a payday loan that can take care of this bill, nothing more.
• Plan your budget carefully, and see how you can make the best use of your payday loan. Payday loans could be very helpful in a number of situations like during a vacation, for home improvement etc., all depending on how you plan your budget. Also remember to plan enough savings so that you are able to pay off this loan with your next paycheck.
• It’s perfectly human to be tempted to spend the cash in hand according to your so called ‘instincts’. While it might be understandable to do so when you have a surplus of expendable cash, it doesn’t make sense to spend thoughtlessly on credit. Payday loans demand accountability.

Like any other thing in our life, payday loans could either be used or misused. They are a great blessing if we make a thoughtful and responsible use of them.