Would a payday advance help make ends meet? When times are tough, any amount of money sure does help. The problems which may result from this type of short-term loan are often overlooked at the very beginning. In order to answer the question in the best possible way, a potential borrower needs to view the loan from beginning to end and decide if the advance could actually help.
You can’t argue that a payday advance offers fast money.
The euphoria over quick money in the bank leads many folks to these direct lenders when financial troubles arise. Financial stresses can cloud our better judgment at times. We tend to look at only the present problem in the moment and ignore the trail of trouble ahead of us.
What do people ignore about a payday advance?
- Convenience costs. Just like the cost for a bottle of soda at the corner store, prices are inflated. Small loans, small returns, and big risks are all leading ingredients to high priced loans. A potential borrower needs to figure out the final cost of the loan and wiggle the amount into the next budget.
- These small loans will be sold to a collector if not paid. No matter the size of a loan, a loan in default will hurt your credit.
- Some folks ignore the state regulations in which they reside and then wonder why they are dealing with a company which does not utilize best practices. A payday advance company will to loan money by avoiding rules and laws, will probably not have good collections practices either. Be careful.
- Fast payoff. The terms on these loans average two weeks. This means that the loan payoff will take a good bite out of your next paycheck.
- Two week terms means interest charges are added to the balance each time a payment is due.
One of the worst practices a borrower can do is to ignore how the payday advance will affect their immediate finances. Most people budget their expenses throughout the month by dividing certain costs into their pay periods. Something has to give in order to make up for having a chunk of money taken away from another part of the budget. How good of a juggler are you? It takes some good adjusting in order for a budget to remain unscathed when paying for s short-term loan in full two weeks after a financial emergency.
The longer a short-term loan remains unpaid, the more expensive the loan becomes. The high interest attached to any remaining principle will eat away at your income with two week term limits. The best approach to paying this loan off is to pay more than just the charges each due date; the lower the remaining balance, the less interest charged. It saves to pay towards the principle each period.
A payday advance deserves priority payment status. This doesn’t make a payday lender more important than any other creditor. Prioritizing this payment will help to protect other costs. Too often, these short-term loans are used without forethought and other budgeted costs end up suffering. Without room to juggle expenses, other payments will fall apart.
