Payday loans are one of those financing tools that can bury you in debt without you noticing it. These types of loans are typically for small amounts and often due on your next payday. This is usually paid through a single payment through post-dated check on the borrowers next payday, typically due within two to four weeks from the date of the loan. The proceeds can be provided through cash, check or transferred to your account.
These types of loans are very much discouraged as they apply unreasonable interest rates up to an annual percentage rate (APR) of four hundred percent (400%). Here are some of the tips you may need in case you need to apply for one.
- Do Not Apply for a Payday Loan on Consecutive Months
A payday loan should only be applied for if it is the only option available. Use it to pay for your expenses and other monthly costs that you may need to settle. It is highly probable that you will be short on cash to cover your monthly expenses as most of your salary is used to pay the payday loan availed the previous month. Avoid applying for another loan the following month. Instead, try finding another way to lower your expenses.
- Do Not Apply for a Loan More Than 30% of Your Net Salary
Make sure that your loan does not consume your entire month of salary. This might make you work on limited budget but still having enough to pay your priority expenses like food, mortgage/rent, utilities, etc. It will also give you a chance to look for other sources to pay for incidental expenses or at worst, delay or hold off payment for next due dates.
- Look for Other Sources of Income
With the digital age, you can generate income from the comfort of your own home. If you find yourself needing to apply for a payday loan, this is also an indicator that you need a higher income that can cover all your expenses. After classifying expenses and eliminating unnecessary ones, you will need to create another source of income. An alternative option is to find a job that pays you high enough to cover for your expenses.