Short term payday loans can serve as a temporary solution for an unexpected financial expense. This solution can be quite helpful, but only when done responsibly. In any financial emergency, it is crucial to think long-term, and be realistic about your current situation. Payday loans should always be your very last option.
Often, there are cheaper solutions.
Avoid these three common payday loan mistakes and get your finances back on track.
- Never Take Out More Than One Payday Loan
Having more than one payday loan is illegal in most states, yet some borrowers resort to doing this in desperate times. Once you factor in the principal and interest along with your usual expenses, you will have more debt to pay back than you earn monthly.
Not only is it illegal to sign for multiple payday loans, it is also totally irresponsible. This additional debt leaves you owing more than the amount you earn each month. Try to avoid this scenario at all costs.
- Never Borrow More Than You Can Pay Back
It might be tempting to take out a larger loan in a time of need. Be mindful, however, and exercise caution in this area. To protect your credit and reputation, you do not want to fall into this default trap of borrowing more funds than necessary. Only borrow enough money to cover your immediate expenses. If possible, borrow less than the amount required and seek out alternative options. This will enable you to successfully pay back your short-term loan plus interest. Focus on repaying in a timely fashion. You will need to take an extensive look at your budget and determine what you can comfortably afford to repay. Payments may be weekly, biweekly, or monthly, so consider your pay schedule and try to time it appropriately. This will cut down on excessive interest fees and save you unnecessary headaches in the future.
- Use A Licensed Lender-Avoid a Middleman
When taking out a short-term loan online, many borrowers will assume that a particular lender has credibility. However, there are many unlicensed lenders on the web. Their website may look legitimate, but the company might actually be run by illegal entities. Many borrowers get caught in the trap of receiving a loan from a questionable lender. Loan sharks or unlicensed lenders will often follow unscrupulous practices. Many of these lenders will extend a loan to you under false pretenses. Some lenders will resort to harsh practices to recover debt, or will have excessively high interest rates. Interest rates on short-term payday loans are usually quite high already- the last thing you need is rates that are even more outrageous. Be sure to research the lender’s credibility thoroughly before entering into a contractual agreement with them. This can be performed by doing a simple Google search about the company. Also, read through your agreement with the lender in its entirety. Choose a credible lender that is licensed by the state. This will protect you legally in the event of any mishaps with your loan.