When you apply for a payday loan, you will receive repayment options determined by the length of the loan. Because payday loans typically have high interest rates, it's always financially beneficial to take a shorter-term loan so that you can repay it quickly with minimal interest.
However, monthly payments on a short-loan may not work with your budget. In that case, determine the most that you can pay toward a payday loan every month and look for loan terms that match your budget. Lender will show possible monthly payments and amortize the loan to help you compare options.
Alternatives to Payday Loans
Getting a payday loan is not the only option for situations that require a lot of money. The best alternative is to pay for weddings, vacations, home renovations, and other expenses by saving money and paying cash, which eliminates costly interest charges. You also can consider tapping into your home equity with a home equity loan or line of credit to pay for home improvements or additions.
In some cases, you may want to consider whether you truly need the expense you'd pay for with a payday loan. Can you scale back a big wedding and pay for it with savings instead? Can your child get a part-time job in college and reduce the size of the payday loan you're considering to pay for tuition?
When Should You Take Out a Payday Loan?
While getting a payday loan can supply you with a quick infusion of cash, it's not always the best financial option. The reasons for taking out a payday loan can vary widely, ranging from paying for a wedding to financing a big vacation, to consolidating debts into one payment.
To determine whether getting a payday loan is the best financial option for you, think through whether you are using the loan to pay for a need or a want. If you are underwater with monthly debt payments, a payday loan can simplify your debt by consolidating all of your loans into one that requires a single – and often lower – monthly payment. Debt consolidation can give some breathing room while you get your personal finances under control.
Other situations may be less clear. Is a vacation worth going into personal debt, or can you save the money first before taking the trip? On the other hand, a payday loan can help you manage the financial side of an unexpected medical emergency that you can't afford. Either way, payday loans can require you to pay large sums of interest, so consider carefully whether they are the best financial choice in your situation.
What to Do If You Don't Qualify for a Payday Loan
If you are turned down for a payday loan, there are steps you can take to improve your financial situation. Most importantly, focus on improving your credit score so that you can qualify in the future. Start by making sure to pay all bills on time and look for ways to make extra payments on existing loans. As you pay down loans and develop a history of responsible repayment, you'll become a more qualified candidate for a payday loan.
In dire situations, you may have other options. Family or friends may be willing to make short-term loans or gifts to help you out, and if you owe money to a hospital or other lender, you could try negotiating better repayment terms.
As you consider whether a payday loan is the best choice for you, think through your long-term financial plan. While getting a payday loan could help you through a tough time or help you pay for a big-ticket item, be sure to first determine whether it's the wisest financial tool to help you meet your goals.
Feature Source: Mountain Summit Loan