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Should You Take Out a Payday Loan?
When was the last time you were short on cash and had to do without until your next payday? Last week? Last month? Last year? It happens to all of us at one point or another. There's absolutely no way to predict what's going to happen next. Disaster can strike your finances in an instant, and there's no guarantee you'll be ready for it. So what do you do now?
You've probably heard of the payday loan-money you can borrow to pay your bills or handle any major expenses when you're running short between paydays. It sounds like an ideal solution to your short term financial problems. If that's the case, why do payday loans get so much negative press?
Before you decide whether a payday loan is the right solution for you there are a few things that must be considered. First and foremost, a payday loan is not your ordinary loan. This is not like a bank loan where you pay small deposits monthly. When you walk into the payday lender they're going to give you a cheque for the amount of money you need to borrow, which will always be less than or equal to your weekly wage, and you'll write them a cheque for that same amount plus a small fee.
When payday comes the lender is going to cash that cheque. The full amount is going to come out of your weekly wages, which is fine as long as you still have enough left over to live on until your NEXT payday. Payday loans weren't designed to be a long term financial management solution. They exist to help handle unexpected expenses, like a vehicle that needs auto repair or a child that needs medical care. As long as you can pay the loan back from your next cheque it's fine.
What happens when you can't?
The negative press most payday loans receive is a result of borrowers who didn't plan for having to repay their loans. They borrowed the money, but when that same amount was taken out of their next check they didn't have enough left over. So they took out another payday loan. And another. And another. And another.
Can you see where they problem is coming from? By the time they're done borrowing and paying off those loans these borrowers will have paid a small fortune in fees. Before you decide whether or not a payday loan is the right solution for you, ask yourself:
1) Is this an unexpected emergency, or the result of poor financial planning?
2) Will I be able to afford to live after I repay my loan?
3) Is this a one time event, or am I constantly running short between cheques?
One-time expenses and short term financial need are perfect reasons to take out a payday loan. Just be sure you're ready when the time comes to pay that loan back.
About the Author Ron Subs is a marketing consultant working with Cash Converters. For more information on payday loans, visit them on the web at http://www.cashconverters.co.uk.
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