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During Difficult Economic Times is a Payday Loan the Answer?
Slow economic conditions have affected several households, making it difficult to make ends meet. Families all across the United States are barely making ends meet. Many are turning to Payday Loans as a possible answer to the struggle. But is this really the answer?
Megan and Bill have been struggling for the past six months to pay their bills. They have been living paycheck to paycheck and with school starting in just a few weeks now they have to get school supplies and new clothes for their two kids. They have no idea where this money is going to come from since they both don't get paid again for three weeks. Bill decides to take out a payday loan to help get them through this difficult time.
According to the Center for Responsible Lending, payday loans typically end up costing more than the original loaned amount. For example, if you take out a $300 dollar payday loan for 3 weeks you can expect to pay an extra 20 to 30 percent on top of the amount that you owe. This being said, people are still turning to payday loans to cover the rising costs of gas, food and other necessities. This is because just about anyone can get extra cash quickly.
Is there a right time to take out a payday loan? Sometimes it is easier to determine when it's the wrong time to get a payday loan. If you are thinking about getting a payday loan to help pay the bills because your current paycheck is not covering them all, this is not a good idea. If you can't pay off your current debt you should not think about taking on another one with a payday loan. That being said, there are times when they can actually help you out. Some situations when they can really help are during emergencies such as an unforeseen medical bill or a broken down vehicle; any situation in which you would need cash urgently.
If you have decided to go the route of a payday loan to help you out, there are a few things that you should consider first. You should sit down and look at your finances. Make sure that you know exactly how much you have and how much your total bills are. Then you need to figure out how much extra money you need and how long it will take you to pay off that amount.
You should know exactly where the money is going to come from to repay the payday loan BEFORE you actually apply for one. Keep in mind that you will need to budget the repayment of this payday loan out of your next paycheck. Make sure that this does not mean not being able to pay another bill that is due.
Another thing to keep in mind is that you should only take out a loan for exactly what you need. While it may seem tempting to take out an extra few hundred to give you a buffer, in actuality this could mean that you are paying much higher fees. This means that it will be more difficult to pay off the loan and you will be giving away more money to the lender. Besides, there are no givens in life... you might lose your job in a week and be stuck with having to pay back something that you are unable to afford.
While a payday loan might seem like a simple solution to a dire financial problem, approach it carefully. Make sure to exhaust all other options before signing on the dotted line. If it is the only solution to help you and your family out, make sure that you know exactly what you are getting yourself into and pay the amount due on time.