Payday Loan Alternatives to Keep You Out of Perpetual Debt
If you are living paycheck to paycheck, or struggling financially in any kind of way, you may be tempted to take advantage of a payday loan. Companies that offer these services provide cash advances for individuals based on their paychecks. These loans are usually short term, lasting anywhere between one day and two weeks. In order to receive this loan, proof of employment or verification of income is necessary. These loans were originally designed to provide temporary relief for individuals dealing with financial setbacks.
If a payday loan is not paid back on time, it has the ability to keep a person trapped in a cycle of debt. This can happen when a person is unable to pay back their loan within the two week time period. For example, a typical payday loan is usually costs $15 for every $100 borrowed. If a person is not able to pay back the $100 loan in two weeks, they can roll over the loan for another $15 fee. If they continue to do this, they can end up surpassing the amount of the loan in fees.
Rolling over the loan seven times can cost $105 on a $100 loan. If a person lets this happen, a $115 debt can turn into a $205 debt. Most individuals stuck in this situation will continue to pay the $15 fee because it buys them time. Paying the small fee seems less expensive than paying off the loan. Unfortunately, when the fee is paid, no part of it goes towards the principle. This is how the person stays in debt.
If you are thinking about borrowing money from a payday loan lender, you should look for some alternatives first. Before you go to a payday lender, always go to a bank or credit union first. People tend to overlook banks because they automatically assume the bank will deny them. How they know if they never tried is a mystery. Any individual that can verify their income has a good chance at the bank. Even if they deny you, they may be able to point you in the direction of a reputable institution that can help you.
If you need the cash to pay a bill, call the bill collector and ask for an extension. If they wont give you an extension, ask them if they will accept partial payment. Many times, bill collectors are willing to work with people who are facing temporary setbacks. They would rather work with you than lose you as a customer. If they wont give you an extension, ask them if they will accept partial payment.
If you need the cash so you can pay for a car repair, see if there is any way you can hold off on your repairs. This is tough to do, especially if you need your vehicle for work, school, or social activities. Explore your public transportation options. Use the bus or train in your area while you save up the money for your repairs. If there is no bus or train service, try car pooling or riding with a friend or neighbor. You can also check your local library, city council, and chamber of commerce for programs that may help individuals who are in this kind of situation.
If you exhausted all your options, and you feel as if you have to get a payday loan, be smart and cautious about it. Do not borrow more than you need because the more you borrow, the more you pay. Also, pay it back as fast as you can. Make that your number one priority over any other financial obligation. If you do this, you will avoid putting yourself in an unnecessary cycle of debt.