Payday loan companies online or storefront have yet to see a decline in application activity. A PEW study showed that there are more and more people choosing to use these direct lenders as an alternative to cutting back on their own cost of living or spending habits. Some folks would say that it is a poor choice in personal money management; others would say it’s a free country.
The rise in the cost of living has not shown signs of slowing down, those with jobs are very lucky and the security of some of the employed may not be very strong as businesses continue to witness slow gains. Since the unemployed will not qualify for loans with direct payday loan companies the employed are the ones filling out the applications.
Personal frugality has helped some debtors pay down debt, but unexpected costs still interfere with the best well-intention budget plans. Personal frugality helps to cut back spending on everyday items and lowers the total demand on the budget. It’s a great way to make a difference with personal debt. What explains the appearance of new online payday loan companies entering the business world?
Payday loan companies take the place of a savings account.
As consumers continue to focus on their debt and the opportunities to get rid of it, if they do not add a savings account to this focus, then payday online loan companies will still see new applications every day. The rush to pay off debt is understandable. People are getting serious about their budgets and even more importantly, they are trying to raise their credit score. In the scramble of lowering their credit utilization rate, they are not preparing for potential emergency costs. Let’s face it; these unexpected costs always seem to be lurking around the next bend.
People are choosing to not add more debt to their credit cards. There is such a focus on keeping total debt low that the short-term loan is a more attractive money opportunity. There is no credit bureau check and no reporting debt to the credit bureaus when using a direct lender. As long as the loan does not go into default, there is no trace of the fast money transaction. If they refocused their goals and objectives to include saving for a personal emergency fund, they would be protecting future budgets from needing to use outside money options.
When struggling to lower credit card debt, the last thing a person wants to do is reuse the available limit. The revolving accounts are set up so the money can be used over and over as long as payments are coming in on-time. When credit utilization rates begin to drop and credit scores begin to reflect all the hard work, those dedicated to the plan will refuse to put any more additional debt onto the credit cards.
Being frugal is a great plan to redirect personal finances. The plan needs to include a savings account, even if it is only $10 a month. Anything which lowers the amount needed to borrow from payday loan lending companies or to keep from reusing credit will continue to support and/or prevent future financial problems.
