Despite the bad rap that they’ve received, payday loans can be a real life saver for those without access to other forms of credit. If you’ve ever been in the situation when you needed cash fast and couldn’t get a standard loan, you know exactly what I’m talking about. Unfortunately, because the industry has some rather rampant abuse issues, this is an option which may not be available much longer.
Payday loans are intended to accomplish one simple thing. They are there to tide you over until you get your check when you run into a genuine emergency. Here are some examples of good and bad reasons for taking out a payday loan:
- Taking out a small payday loan to buy groceries because your kids need to eat may be a good idea.
- Taking out a payday loan because you’re out of beer (or malt liquor, or wine, or your liquor of choice) is a very bad idea.
- Taking out a payday loan to pay for car repairs so you can continue to go to work may be a good idea (assuming public transportation isn’t available).
- Taking out a payday loan so you can get new rims or spinners is a bad idea.
You shouldn’t take out more of a payday loan than you can afford to pay back with your next paycheck without needing to immediately borrow all of the money back again. Too many people get into the trap of borrowing as much as they can, then finding themselves in a bind when they need to pay it back because there’s not enough paycheck left to cover the week’s expenses. They end up borrowing the money again, ending up in a vicious cycle known as reloaning which often keeps people tied up for months at a time, paying exorbitant amount of interest.
Because some people have gotten themselves in over their heads with reloaning, and because some unethical lenders encourage the practice, several states have enacted laws governing the industry. These laws range from forcing lenders to disclose the actual annual interest rates to giving borrowers more liberal repayment options to outright banning payday loans altogether. If you live in an area where payday loans are still legal, make sure you use them carefully.…
If you’re on the lower end of the income spectrum, chances are you know what it means to have a need and not have the ability to pay for it. For many people, payday loans bridge that gap between when they need money and when they will have money. Used sparingly and paid off promptly, they can be a useful enough tool. The problem comes in when people borrow more than they can afford to repay, putting themselves into an endless cycle of reloaning.
Back in the day, many of us who grew up on the wrong side of the tracks watching our parents struggle to make ends meet had a wonderful opportunity to observe better ways of dealing with our financial situations. We’re not saying you should never take payday loans if you need them. What we are saying is that there are other things you can do to cut some corners and save some of your cash so that you will have some when an emergency hits. Here are some of the things our parents did before payday loans were commonly available:
- Clip coupons. You can literally save thousands of dollars per year by going through the Sunday newspaper and your daily mail and clipping coupons. Two things you do need to look out for, though: Coupons are an advertisement designed to get you to buy a particular product. Sometimes you can get an off brand product cheaper without a coupon. Also, make sure that you’re not buying products you don’t need just because you have a coupon.
- Garage and Yard Sales. Your kids might not like wearing hand me downs, but if you buy them in a different neighborhood, no one else is going to know the difference. We grew up wearing fairly stylish clothes that my parents never could have afforded new because our mom had the sense to buy them at garage sales, saving hundreds of dollars every school year.
- Farmers Markets. Not only can you get a lot of your groceries much cheaper, but you’ll be buying fresh produce, which is much healthier than the canned or boxed foods most of us buy.
- Save. Here’s the thing. We know you don’t have much money left after you pay the bills. We also know you want to have at least a little bit of fun with it. But it’s no fun being stuck repaying cash advances for months at a time. So, instead of spending every extra penny that you have, save half of them. You’d be surprised how fast it adds up, and you can still use the other half to have a good time.