If you have ever wondered how people get caught up in the cycle of taking out payday loans to help them from one paycheck to the next, you have to realize that many people did not plan for things to happen that way. You never know what life has in store for you and what unexpected event is doomed to occur.
Unfortunately, many people live their life thinking that nothing will go wrong, until it does. If you are not financially prepared, you might require short-term loans to help you get back on your feet. Depending on how quickly you need the money and how good your credit history is, you could end up applying for instant loans.
Once this occurs, you could end up in the same financial situation as the people you once wondered about. Without any savings to fall back on, the cycle can rapidly become vicious if you do not find a way to recover. Suddenly, you find yourself taking one payday loan after another, until you stop living paycheck to paycheck.
Sadly, this is how many people get sucked into the payday loans vortex. What can you do to avoid payday loans and, with them, getting overwhelmed by debts?
Understanding payday advances
Sometimes, you have to fully understand the danger, for it to have meaning and for you to learn to avoid it. Instant payday loans are short-term solutions to financial emergencies. They are designed to help people who cannot or do not want to utilize traditional loans. The loan comes in small amounts determined by your income and are meant to help you until you reach your next paycheck.
Payday loans should only be used for emergencies. They are not meant to be spent on frivolous things, such as shopping trips or weekend outings. The interest rate can be high, but, compared to paying late fees, reconnection fees, or being late on your rent, it could be worth paying.
It is wise to pay off the loan on your next paycheck, in order to reduce the amount of interest and fees that can get tacked on if you stretch out the payments.
How to avoid payday loans
The most important thing you can do to avoid payday advances is to be prepared. Do your best to set aside some money with each paycheck. Even if you cannot save the suggested 10%, anything that you can tuck away could be of help later. Would you not rather borrow money from yourself, in theory, than from a lender charging you $15-$25 dollars per hundred?
Try to make sure you are covered for emergency situations that normally cause people to borrow money. For example, you can avoid emergency medical expenses if you purchase health insurance. Get an extended warranty on your car, if possible, to cover costly car repairs. Live within your budget, so as to avoid living from paycheck to paycheck. Being prepared might cost a little up front, but, in the long run, it can help you avoid payday loans.