Misusing money is one of the problems people have especially when they have a lump sum. A lot of people have applied for loans to solve unexpected occurrence only to divert the loan to other uses. This is wrong and it is caused by a number of factors such as lack of planning, lack or poor financial advice etc. If you are considering taking a payday loan to solve a financial emergency you are having, you need to consider the following tips to avoid making mistakes.
1. What is your payday for?
This should be the first thing to consider before applying for a loan because you may end up accruing high-interest levels. If you are not careful, you may end up paying up to 400% interest on a two weeks’ payday loan of approximately $100. You should only take the loan to cover a reduction in cash flow and not to cover general living expenses or settle monthly bills. You may end up in a cycle of paying a loan and taking another to survive. If you misuse the loan, you might end up defaulting on your payment or taking another loan right after repaying the original. You have to be very cautious what you are planning to use the loan for, how you are planning to repay it and how long you should have the loan repaid. Take also into consideration the interest rates because they may turn out to be exceptionally high!
2. Can you afford to pay the interest?
Although different states in the US have implemented strict caps on loan amounts and the total amount of money repayable, payday loans are not regulated. Therefore, the interest rates can fluctuate wildly from approximately 237% upwards depending on your state, individual lender, duration of the agreement and other variable factors. Therefore, before taking a loan, you should understand the interest rates offered and calculate the total amount repayable at the end of your agreement. It is advisable to read and retain any fine print that is associated with your loan agreement for future reference. You should never sign any agreement if you’ve not read and understood it because you could end up paying extremely high-interest rates!
3. Avoid using multiple lenders:
Although you may need more supplements to fix your problems, you are not supposed to get loans from different money lenders. In fact, it can be illegal to have more than one advance on a single paycheck. Besides, you may not be able to make the agreed payment in full if your debt exceeds your monthly salary. As discussed above, you should not have a payday loan to pay your monthly bills or living expenses. Rather, you should apply for a payday loan because you have an emergency financial problem that needs to be solved.
These type of loans have been very beneficial to a lot of people who have found themselves in a financial crisis. You should pay attention to affiliated interest rates and terms of your loan to avoid breaching the terms or failing to pay the loan. Finally, when applying for the loan, you can ask as many questions as possible to help you avoid having any blind spots.