Thinking About Pay Day Loans? Five Rules to Follow
So, you’re thinking about whether you should get a pay day loan, huh? You probably are hesitating because you have read words like “predatory” applied to pay day loans in the news or on a blog.
Well, let me put your mind at ease. The vast majority of pay day loan customers, more than 90 percent, report that they had a good experience with their pay day lender. The “cycle of debt” that anti-pay day loan lobbyists go on and on about only occurs in a tiny fraction of cases.
Always use pay day loans responsibly
They key to pay day loans is to use them the right way. If you are irresponsible when you borrow pay day loans, you can get yourself in trouble.
But don’t worry, using pay day loans the right way is easy. Follow these simple rules and everything will turn out well.
1. Have a payback plan
One important thing to keep in mind is that a pay day loan is meant to be short term. In order for your pay day loan experience to go smoothly, you must pay back your loan and the service fee on or before the due date you set up with your pay day lender.
A pay day loan is meant to be exactly what it sounds like : a loan that will get you to your next pay day. So make sure you agree to pay back your pay day loan on a date that falls after your next paycheck. Also, make sure you borrow and amount that you can cover with your next paycheck.
2. Figure in other expenses
When you make your payback plan, make sure that you’ll be able to pay back the full amount of your pay day loan and still have enough money to cover your other expenses.
You don’t want to end up needing another pay day loan during your very next pay period, so don’t borrow more money than you can afford. Make sure to factor in your other bills.
3. Emergencies only
Pay day loans are not meant to be used for entertainment or unnecessary expenses. There are a few specific situations when it does make sense to use a pay day loan for something besides the very basics — food, car, heat, etc. — but we’ll get to that later.
Examples of when it’s appropriate to use a pay day loan are when your car breaks down, when your cupboards and your bank account are both empty, to avoid getting your power shut off or when using a pay day loan will save you money.
4. Use pay day loans to save money
Many people use pay day loans to avoid overdraft fees or bounced check fees. Often the fees a pay day lender charges for one pay day loan are far less than you’d end up paying if you overdraw your bank account or write a bad check.
Furthermore, pay day loans come with a one-time fee, while banks often charge a separate fee for each transaction after your bank account has been overdrawn.
5. Use payday loans to make money
There are a few select cases in which you might find that a pay day loan will give you an opportunity to make money. These instances are pretty rare, but it does happen.
For instance, I know a man who used a pay day loan to buy a vintage car that was on sale for cheap. he got the pay day loan to ensure he could snap up the vehicle before someone else did. He put a little work into fixing up the car and later made a few hundred dollars off of it.
Follow these rules for responsible pay day loan usage, and you’ll surely end up with the majority of pay day loan customers who agree that pay day loans are a much needed option in financial emergencies.
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