Payday loans can be a useful tool to pay for unexpected expenses, but misuse of these loans is very possible. As with any type of loan, improper use of payday loans is potentially very harmful.
Do not pay interest on payday loans. Interest is added to a loan and is charged at a higher rate than the original rate, so do not be tempted to pay it. You will end up paying far more in interest than you borrowed.
Do not fail to repay your payday loan promptly. If you are late with your repayment, the lender may report you to the credit bureaus. And you will be seen as someone who is irresponsible with their money. In fact, the credit bureaus have no trouble reporting late borrowers.
Do not use high fees for payday loans. If the service fees and ATM fees are too high, they are going to appear as a charge on your credit report. Keep in mind that if you ever try to get another loan, the lenders will look for high fees.
Avoid using your cards for payday loans. Even though the payday loan company can accept the cards, most companies will report them to the credit bureaus.
Avoid paying a fee for allowing payday loans. If the company requires a fee for such an authorization, this is a red flag.
Do not take out a loan for unexpected expenses and use it for an emergency. Even though emergency situations arise, do not use payday loans for unexpected expenses.
Do not use a credit card to make your payday loan. This is a mistake many people make and find themselves in trouble. Rather than using a credit card, get a personal loan from your bank.
Do not go on a spending spree, for payday loans. Do not blow all of your money on emergency items. You might go through debt again later, when you actually need cash.
Do not go on spending sprees when you have payday loans. Instead, cut back on the emergency purchases, the frivolous spending, the unnecessary bills. Once you have paid off your payday loan, you will be able to focus on things that will help you financially.
Although payday loans are a good way to get extra cash quickly, misuse of this type of financing can be devastating. With the warning signs above, you can reduce the chances of a problem.
So you have learned a few things about payday loans. It is possible to borrow small amounts of money for unexpected emergencies, but misuse of this type of financing can be damaging. Follow these tips to minimize the potential damage.