Many individuals and families are living paycheck to paycheck in the current economy. Unfortunately for these people, there is no extra cash for unexpected emergencies. When emergencies arise, they have to look for alternative ways to manage their finances and weather their cash flow crisis. For this reason, many people turn to short-term and payday loans when they are in a financial crunch. Even though these loans come with strict repayment policies and high APRs, sometimes these loans are a struggling individual’s only alternative source of income. Below individuals will find tips to help them utilize a short-term or payday loan successfully.
Rule 1: Read all the Paperwork
While the loan process for a short-term or payday loan is relatively easy, there is a great deal of paperwork involved. For a borrower to truly understand the loan they are agreeing to, it is necessary to read all the paperwork involved in obtaining the loan. Information that the borrower will want to pay close attention to include the APR (annual percentage rate) associated with the loan, and loan origination or membership fees required for the loan, the expected repayment date of the loan, and penalties associated with the loan if the borrower were to default on the loan.
Rule 2: Borrowers Should Only Borrow an Amount They Can Pay Back
When applying for a payday or short-term loan, resist the urge to over borrow. Borrowers should think about their current situation before agreeing to a loan amount. How much is needed to cover the current emergency cash flow problems? Is the repayment date and amount truly possible to do? If the borrower fears they cannot pay back the entire loan amount by the repayment date, they may need to consider borrowing a smaller amount.
Rule 3: Abide by all Loan Requirements
Once a payday or short-term loan is acquired, it is imperative to make sure to abide by the loan requirements. This includes making scheduled payments in full and on time. It is crucial to remember that a failure to make payments on time can lead to massive increases in the amount of money owed on the loan.
Rule 4: Try to Avoid Revising the Repayment Date
If the repayment date on the short-term or payday loan is approaching, and the borrower does not think they can pay the loan off in time, it may be necessary to renegotiate the repayment date. However, it is important to realize that not every establishment will offer this service, and in some cases, a renegotiated repayment date can change the terms of the loan. If at all possible, borrowers should make every effort not to change the repayment date on a short-term or payday loan.
Rule 5: Not a Long-Term Solution
Short-term and payday loans are not meant to be long-term cash flow solutions for borrowers. The fees associated with these loans are much higher than traditional loans and can cause greater financial hardship than they ease if they are turned into a long-term solution. For this reason, borrowers should only turn to these types of loans in a true financial emergency. For long-term solutions to cash flow problems, borrowers may need to rethink their monthly living expenses and make budget cuts to make sure they are living within their means.
While it is entirely possible to borrow with a short-term or payday loan successfully, it does require substantial attention to detail from the borrower. Following these 5 tips for borrowing short-term or payday loans above will help borrowers borrow successfully: