A payday loan is a short term loan from a lender that is not a bank. They are sometimes called cash loans or fast cash. The lender charges a fee for the loan plus interest.
The loan will be due in a short time, which makes it almost impossible to pay it back because you are struggling to manage your day to day expenses and make the payment. You will get an extension, for another fee, plus more interest.
Very quickly you will owe almost double (or more than double) the original loan.
Never use payday loans. Ever. Ever. Once you start using payday loans it is seriously hard to pay them back.
A payday loan is easy to get and you don’t need to have a good credit score. That makes them tough to resist if you’ve had trouble managing your money in the past. It also makes it more dangerous for you.
If you are considering a payday loan, take a look at all of these other options first:
- Eat beans, couch surf, and quit smoking and any other costly bad habits you have.
- Get another job. Cash in your empties. Visit the food bank.
- Sell something. Stop spending money.
- Talk to the landlord or whoever you are behind on payments with and see if you can make arrangements to pay them with your next paycheck.
- Credit cards. If you read this page, you know I am not a fan of using credit cards to tide you over until your next paycheck. Credit cards should only be used when you have the cash to pay them off. However, the big exception is payday loans. A credit card will charge you a lot less interest than a payday loan and is less risky. If you find yourself using a credit card to avoid getting a payday loan, you need to REBOOT your finances right away.
- Talk to your bank. You may qualify for a line of credit, which charges a lower rate of interest than a credit card. You still need to work hard to pay the loan off, but it’s much better than a payday loan.
- Borrow from friends or family. Admit you are in trouble. Enough said.
- Pull money from your retirement fund or your emergency savings.
If you are still considering a payday loan, you need to take quick action to stop the outflow of money and get your spending under control.
Well, you’ve made it to the bottom of the post. I hope you didn’t take out that payday loan and you are taking one of my challenges, to Get Better with Your Money.
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