Payday loans sometimes come with negative connotations, but if used responsibly they can be a useful financial tool during challenging times. When you are faced with an unexpected expense you don't have the funds to cover, borrowing from your next paycheck with a payday loan can help you navigate the emergency without resorting to borrowing money from friends or family. Here are four tips for using a payday loan responsibly:
Only Use Payday Loans When Really Necessary
Payday loans are meant to be used for short-term emergencies and unexpected bills, rather than as long-term credit for items you'd like to buy but can't immediately afford. Because payday loans need to be repaid more quickly than other forms of credit, and involve fees and interest, it's usually unwise to use them for luxuries instead of necessities.
If you have an unexpected car repair that can't be put off, a broken furnace in the middle of winter, or you're out of groceries a week before payday, a payday loan may be a great solution to get you through this time.
Only Borrow What You Need
When taking out a payday loan, you may be offered a loan up to the amount of your next paycheck. Just keep in mind that the more you take out as a payday loan, the less money you will have from your paycheck when you do get paid, which can lead to a cycle of needing to take out back-to-back payday loans. If you need $200 to cover a bill, don't be tempted to take out $1000 just because you can. Remember that you are borrowing money from your future self.
Keep Interest and Payment Terms in Mind
When deciding how much you can afford to borrow, be sure to double check the terms of the payday loan, including fees and interest. You may want to shop around to find the payday loan with the most favorable terms, so that you don't end up owing more than you can easily pay back once you are paid.
Make a Plan to Build Emergency Savings
Since payday loans usually only make sense as a short-term strategy, take this opportunity to examine your finances and find ways to begin saving each paycheck. It can feel impossible to save when you are living paycheck to paycheck, but by minimizing your expenses (such as cutting cable, shopping with coupons, etc) and maximizing your income (perhaps by asking for a raise or getting a side gig), you may surprise yourself with how quickly you can build savings. That way, the next time you have an emergency, you will have the funds to cover it.
By following these tips, you will be able to make the most of a payday loan like Payday Express without getting in over your head.