For a while, I was confused about payday loans and their perceived value. But after doing some research on Google News about how to use them effectively, I’ve come to the conclusion that you can use them responsibly and to your advantage, especially when you face a serious financial shortfall (ie you can’t pay your rent as I once couldn’t).

The key is to research the various options for payday loans online, do your due diligence, and adhere to the following set of standards for how to successfully navigate this world:

1. Proceed slowly. Payday loans are not a source of cash for purchasing frivolous wants–they are a source of emergency cash when you can’t live without it and you’ve already exhausted all other options for funds. If you can’t get by without a source of income before your check rolls in and you literally have no other options, then a payday loan makes sense.
2. Plan for the pay-back. This one is pretty easy–do not borrow more money than you’ll be able to pay back once you have your check! Payday loans typically come due within a week or two of you receiving your paycheck. Be prepared to pay every cent back immediately.
3. No free money. This is not free money or a free loan. Obviously, the companies providing this service are for-profit entities, so you need to be fully aware of the terms before signing on the dotted line. Most charge a percentage rate or a flat fee based on the amount borrowed. Do your due diligence to understand the entire balance you’ll owe prior to taking the loan!
4. Limit exposure. Try your best not to rely on payday loans in an effort to improve your finances and relieve the stress of never having enough money. Refer to the first three rules of this list if you’re having a hard time fighting the temptation to take out multiple loans that you can’t pay back.

 

Have you ever used a payday loan?

Photo credit: taberandrew