Unlike bank loans, payday loans do not require long waiting times, provision of a lot of documents, and proof of solvency. All that is needed for the online application is a device with access to the internet. We will tell you how to properly manage your payday loans so as not to fall into a debt trap.
Borrow only what you really need
People often have controversial opinions about payday loans. Some people consider loans an absolute evil, and others, on the contrary, believe that a loan is an incredible boon that allows you to buy what you want at the moment when you want it the most. The truth lies somewhere in the middle. But one way or another, a loan is an opportunity to quickly finance something you lack money for. However, this opportunity is not free. There is a saying about debt: “You take someone else’s for a while, and then you give yours and forever.” In the case of loans, this proverb must be supplemented with the fact that you give for many years and much more than you took.
Goods and services can be divided into two categories: “important” and “just wanted”. Important ones are, for example, buying an apartment (housing will become your valuable asset throughout your life, and then your children will get it), urgent medical expenses, and so on. Everything else, including a new car, a vacation, a wedding, a fur coat, an anniversary celebration, and the like are “just wanted” purchases. They will lose their financial value after some time.
No one is insured against a mortgage, loss of health or force majeure. But you must admit that paying off a mortgage is much easier if you don’t have loans for a new bag, a wedding dress and a vacation in Bali. Thus, the first principle to be guided by is rationality in current purchases and spending on what “just wanted”. Do not squander your “credit potential” on nonsense.
Keep track of your debt load
The second important point is the debt/income ratio. Find out how much your debt load corresponds to your real income size. No matter how much you want to order expensive champagne and oysters in a restaurant to show that “you can afford everything”, consider whether it’s worth borrowing three of your salaries for one dinner?
Therefore, do not increase your debt load. A high debt load is only good for the bank, but not for you.
A debt/income ratio of 10% or less means that your finances are exceptionally healthy, and ratios within a range of 10 to 20% represent good credit, but at 20% or above, it’s time to assess your debt load.
Choose a company with the most favorable conditions
Each microfinance institution has its own terms and conditions. APRs, available loan amounts and terms vary by lender and state. Typically, the process involves no paperwork, no credit checks and no collateral.
Today, you can quickly find a lender with the most favorable loan conditions using online connection services. To do this, you just need to fill out a short application form where you indicate the desired loan amount and term, place of residence, government-issued ID, and employment/income information. As soon as you submit a request, you will get a lending decision, which is usually made automatically by a system. The system analyzes your request and matches you with the legitimate lender that seems to suit you most. Loan approval rates are very high so you have a high chance of getting approved for a payday loan, even if you have a bad credit score. You can expect to have the money in your bank account as soon as the same day or the next business day. The online portal works 24/7, so you can apply for a loan at any convenient time.
Consider whether you really want to refinance the loan
No matter how tempting refinancing may look. It is important to understand that refinancing is the same loan but for an even larger amount, a longer period, and often at a higher rate than your existing loans. Yes, it can be useful if you urgently need to lower your monthly payments. But really, it’s just a huge new long-term debt, and that’s the only way it should be treated. Refinancing is a tool of extreme necessity.
Do not borrow money for other people
Do not apply for a payday loan at the request of another person, no matter how close your relationship is. Just don’t do it. This is risky – a friend or relative may not make payments or hide from the lender. Sooner or later, the lender will call and ask you to pay the debt.
If you still decide to take a loan for another person, ask him/her to sign an agreement. Before that, coordinate the text with a lawyer.
Important questions to ask yourself before taking out a loan
Financial experts advise asking yourself a few questions before taking a loan.
- Can I afford it?
- How will this loan affect the family budget each month?
- Do I really need these expenses or purchases?
- Do I need them now or can I wait until I save the money?
- Am I too optimistic about my ability to pay?
- Did I take into account the possible risks?
Also, you must always remember the golden rule: you take other people’s money for a while, but you will have to return your own forever.