Almost everyone has been in the position where they are struggling to pay bills and money is extra tight. You may have considered various options to solve your money problems in these cases and one of those options may have been to head to a local payday loan business and obtain some money in advance. This might help you hold off the bill collectors until your next paycheck comes. Sadly, while a payday loan sounds like a perfect quick fix, they may carry with them more problems than they are worth. It’s very probable that you could end up in even worse debt than you struggled with before the loan.
How Payday Loans Work
Let’s say you walk into a payday loan store and you ask them for $200 to hold you over. You get that money right away and you’re off and running again. But you only get that money for 2 weeks. Remember, this is a payday advance, which means you only get it until your payday comes along. Of course, you are also going to get charged a small fee for being able to borrow that money. Let’s say they charge you $20. No big deal, right? You have the money you need and paying that little bit extra won’t be a big concern.
Then that two-week time limit comes fast and your bill is due. Now you have to pay that $200 plus the $20 fee. Unfortunately, you find that you have even more bills to pay or more expenses and you really don’t have that $200 to pay back yet. You definitely don’t have the $220. So what do you do? Well, you have to go back to that payday advance place and let them know you don’t have the money. That’s not a problem, just get an extension. So for another $20 you can keep the money for another 2 weeks. Great, until that two weeks, is up too and the whole thing starts all over again.
Don’t Get Stuck In A Debt Spiral
A large number of people find themselves trapped in this type of debt spiral where they don’t know how to make ends meet, borrow a little bit of money and then find that they can’t ever pay it back in full. In fact, research shows that up to 80% of people who do borrow money this way aren’t able to pay it back by that first deadline. It’s unfortunate and it is something that no one wants to be stuck with, but it’s happening to more and more people every day. The key is avoiding that spiral, but of course, that’s not quite as easy as it might sound.
What you really need to do is make sure that you’re staying out of this spiral in the first place and avoid borrowing money from payday loan companies. Budgeting is crucial and even though it’s difficult, it’s going to make a huge difference for you in the long run. You’ll be much better off by cutting back instead of trying to make things work out later with that extra payment to the payday lender hanging over your head.
What If I Have Already Taken A Loan?
If you absolutely cannot avoid borrowing money from a payday lender or if you’ve already borrowed money and now you’re looking to get yourself out of that hole you’re going to need to make some payments. Making just the minimum in payments is never going to get you anywhere because you won’t even be paying off the fees each week, let alone the actual amount that you borrowed. What you need to do is make sure that your payments are large enough to at least put a few dollars toward that full payment. Keep in mind that original borrowed amount is still going to be there waiting for you if you aren’t careful, and it’s going to come after all those $20 fees.
If you can pay even $25 or $30 each pay period it’s going to slowly cut down on the amount of money that you owe. Paying only the borrowing fee means that you just break even every two weeks and you will struggle to catch up. If you already in debt, make sure you’re paying something, even if it seems as though it’s a small amount. With this debt in need of payment, make sure you’re working as hard as you can to keep yourself from spiraling down further and further into more debt.