Payday loans are short-term financial arrangements designed to assist you in the case of an emergency or unexpected occurrence, and their primary purpose is to ensure that individuals remain cash-rich even in the event of an unexpected expenditure.
What is Your Payday Loan for?
So begin by assessing what your loan is for, and whether securing a short-term loan with substantial interest is the best way to achieve your goals. While they can be effective in making an unexpected purchase and providing short-term relief to a financial crisis, payday loans are entirely unsuited for helping you to settle monthly bills or living expenses. If you use them for this purpose, then you run the risk of either defaulting on your payment or taking out a further loan once you have repaid the original.
Paying Attention to Detail
The issue of interest is critical, with this in mind, the rates of interest can fluctuate wildly. It is therefore important that you understand this prior to take out your loan, and calculate the total amount that would be repayable at the end of your agreement.
Always read and retain any fine print associated with your loan agreement, and make sure that you are fully aware of how much will be due and on what specific date. This should help you to discern whether it is an agreement you can adhere to, and also help you repay it as required.
Avoid Using Multiple Lenders at All Costs
There may be any number of reasons why you may use multiple payday lenders, but the truth remains that this can be an illegal and entirely inappropriate practice. To begin with, you should only secure a single loan against any given paycheck, as it is an offense to have more than one advance on a salary payment. Not only is this against the law, but it can also leave you with a sum of debt that exceeds your monthly salary and renders you unable to make the agreed repayment in full.
Similarly, it is also unwise to secure a loan from a brand new company in order to pay an existing balance. Although this is not technically illegal, it is considered wholly inappropriate as consumers should only have a single payday loan at a time. Again, this also does little to help break your cycle of debt, especially as using one loan to eliminate another fails to deal with the financial issues that caused the need to source credit in the first instance. This is how multiple loans end up being borrowed against the same collateral, as short-term debt becomes a long-term problem.
The Bottom Line
While payday loans can be extremely useful in the case of an emergency or unexpected event, it is the consumers duty to understand their nature and use them responsibly at all times. Paying attention to the terms of the loan and the interest rate affiliated to it is critical, as this helps you to decide whether it is suitable for your needs and make repayments when necessary.