Payday loans are a veritable double edged sword. They are important for helping people to pay bills and get through to their next paycheck. However, payday loans also come with an interest rate that can be difficult to pay back which could ultimately put the borrower in a worse spot than they started. The key to using payday loans for bad credit is therefore to use them only with a plan to get back to a place of liquidity and sustainability.
The reality is that in life there are unforeseen setbacks and expenses that happen which may leave a person in a spot where they need a payday loan for to make it to the next pay check. If you get in that situation, make sure to vet the payday loan company that you are considering using beforehand. There are a wide variety of payday loan companies to choose from so don’t necessarily choose the one that is closest to you by default. There are plenty of great payday loan companies, but there are also nefarious companies that are unscrupulous and try to take advantage of people who are at a point of struggle in their life. The Better Business Bureau is a great source of information for people to see specifics on payday loan companies and there are many other websites that offer reviews and feedback from prior customers.
While you are doing the review, the key variable to pay attention to is the interest rate being charged. When you are struggling to make every paycheck last, every dollar and cent of interest that you pay matters. Assuming your list of payday loan companies is winnowed down to the most reputable companies, choose the one that will charge you the least amount of interest. Once again, the ultimate goal of using a payday loan is to maintain your credit score, pay all your bills and get back on your feet so that you can start building savings that will be sustainable.
The option of using a payday loan will give you liquidity when you need it the most. However, it will not be a solution to your cash deficit problem in the short or long-term. The right way to respond to using a payday loan is to set up a budget that will allow you to get rid of your cash deficit. You shouldn’t feel the need to automatically cut all of your expenses. Instead, try to be prudent in looking at those items that you spend on regularly that are not necessities. Your Venti Starbucks coffee or you smart phone expense may be the first items to look at each month because you can live without them. The lesson is that although a payday loan is an option, it should be a last resort that you are only leveraging when you absolutely need to do so. When you do take that option, make sure to complete your due diligence to find a company that will be on your side and help you get back on your feet.