Let us be frank. It’s always best to have an emergency fund for all those times when you may need some extra cash suddenly. Life gives us unexpected moments. Even small amounts such as $500 or $1000 could help us immensely. But the reality is, very few people can maintain an emergency fund, because they are busy meeting their everyday expenses, and saving for the future.
So what do you do if you suddenly have to make a payment, but don’t have the resources? You can always take a payday loan or a cash advance loan. These short-term loans will give you immediate respite. You pay back only after the next payday. These loans are easy, quick and convenient.
But before applying for your payday loan, do consider all your options.
Consider the following points before taking your cash advance loan.
1. Are you ready to take financial responsibility?
When you are taking a loan, whether it is for the short or long-term, you are making a financial commitment to pay it back. Are you ready for this? Up to this point, you may have led your life in a certain way where there was no commitment to make big payments apart from your utility bills. But now, once you take the loan, you will have a creditor in your life that needs to be paid back. So you might have to make a few curtailments to save money. Cut the coat according to the size.
A payday loan is the best option, because you take the money for just a few weeks. The amount is also less. So you end up making small adjustments for just a short while.
2. On payday, your entire loan money will be deducted from the bank
Payday loans are small cash advances to see you through till the next payday. However, on your payday, the amount you have taken is going to be deducted entirely from your bank account directly. So next month too, you will be a little short of cash. But you have successfully dealt with the emergency. So it’s good to plan well in advance so that you can deal with the situation efficiently. Slash all the avoidable expenses for a few days so that you don’t have to take another loan in the next month.
Also remember, take only the money you need. No more! This way, you don’t have to repay more than you have to.
3. Seek an extension if you cannot repay on time
Most people don’t know this, but the fact is that, you can actually ask for an extension if you are unable to repay the money after payday for some reason. But make sure that your lender is a member of the CFSA (Community Financial Services Association of America), because there are a few businesses that don’t like to mention this upfront.
All CFSA member businesses will have to offer you time till the next four paydays to repay the due amount, and that too without any extra fees, if you are unable to repay on the initial agreed upon due date. Nobody can force you to pay back. All you have to do is just ask for the “Extended Payment Plan”. Look for the blue oval CFSA logo in the website or at their physical office of the lending company before taking the loan.
4. Money management classes
In recent years, severe restrictions have been imposed on payday lending businesses across the country, though millions of people are still taking these loans. Critics have accused that payday loans can go out of control when the debtor is unable to pay back.
Some payday loan businesses are now offering money management classes and tutorials to help their customers learn to manage money better. Though students in 17 states get finance training in their high schools, a survey of the council of economic education has found that there is still a huge dearth of financial knowledge. So it might be a good idea to go for this training. Any help is after all, always welcome. The financial knowledge you gain will surely help you in the future.
5. Take a loan for a longer term
Cash advance or payday loans are typically just for a couple of weeks, till your next payday. The amount is about a $1000, a little more or less for immediate financial emergencies. However, there are a few lending companies that are now offering loans for a longer term as well. It is still called a payday loan, but you get the money for 3 months or so. But you need to choose this at the very beginning.
6. Take the loan for the right reason
You should realize at the very outset that a short-term cash advance will not satisfy all your needs. For instance, you cannot, of course, purchase a new home or a new car with the money you get, because you will not get a lot of money from these lenders. On an average, these loans are about $1000. You cannot even go on a long vacation with this kind of money.
A payday loan is for emergencies. Perhaps you need it to pay your utility bills or sudden medical expenses or for carrying out emergency car repairs. It’s not to buy a new gadget or television set. You should use the money you get from the payday loan wisely.
7. Always talk to your lender before taking the loan
Even if you are dealing with an online agency, make it a point to talk to them always before taking the loan. That way, you will know who you are dealing with, and will be more certain of the provider. Check the website to see whether there is any contact information. You should be able to communicate for any clarification you need, or in case there is any complication. Remember, there will always be some businesses, in any industry, which is not that ethical. Ask for the terms and conditions clearly and be sure about them before taking the final decision. You should know the interest rate clearly and the payback policies. Ensure that the lending agency is licensed in your state. Every state has different rules governing cash advances.
8. Interest and fees
According to new regulations that came into effect last year, you cannot be charged fees and interest that exceed 100% of your original sum. It is reassuring to know that there is a limit on the final bill, but you will still want to be sure of what you are paying back. Check to confirm how much money will be deducted from your bank account after the payday. You need a clear idea of the money you will be left with.
There are no credit checks in payday lending, which means that you can get the loan even if you have a medium to low credit score. But, there are some businesses that will check with your employer to verify that you are actually working there, have a regular source of income, and are actually getting the money you have mentioned while making the loan application. There is nothing wrong with that, because these are businesses after all that will want their money back so that they can lend it to others in need.
But be sure about what to expect, and inform someone at your workplace that an inquiry might be made about your work status and pay per month. Also ensure that you have supplied accurate information while applying. Payday loan applications are almost always approved. This will improve your chances.
10. A payday loan may or may not affect your credit score
A few payday lenders say that a payday loan will improve your credit score. In reality, this may, or may not happen.
Yes, it is a fact that your standing improves if you repay a loan, any loan, as you are viewed as more credit-worthy, but there is no lending business that can claim to be working with the credit agencies. It is also likely that you will get future loans at friendlier terms if you can show a history of successfully repaying loans on time.
But don’t expect more, apart from getting the money you need to solve your immediate financial situation. This is the core concept of a payday loan.
You can apply for a payday loan with us here.