Payday loans have been demonized by the press, condemned for having too-high interest rates and made out to be a tool for lenders to use to prey on unsuspecting borrowers. While it's true that not every borrower has a good experience with these types of loans, the truth is, payday loans can be a very useful tool for managing unexpected expenses. The key to having a great experience with borrowing money through a payday lender is to understand how the loan works, and make smart choices in how you manage the repayment of your loan. Here are some tips to help ensure you have a great payday loan experience.
Weigh your options
Many people borrow money from payday lenders such as EZ Money because they face a financial crisis, such as unexpected medical bills or car repairs. While some people may be able to put these expenses on a credit card or borrow money from family, others may not have that option. Some unexpected costs could have long-term repercussions if not dealt with immediately. For example, if you can't drive to work because you can't afford car repairs, you could lose income or even lose your job.
Payday loans do have interest rates that are higher than traditional loans, but they also have much shorter terms. An APR of 300% would be unheard of in a traditional loan, which would typically be paid back over months or years, but a payday loan with the same interest rate is paid back in weeks, making the actual interest paid much lower than many people realize. A fee of $15 on a payday loan of $100 that is paid back over two weeks may work out to a high APR, but it is much better than losing wages over a lack of transportation or losing access to utilities because of unpaid bills.
Read the small print
Not every payday lender is created equal. Just as with any other type of lender, some are very open and honest about the terms of your loan and the repayment process. This is the type of lender that you ideally want to borrow from if you want to have a good experience. A good payday lender will make sure that you understand the fine details of the process and fully disclose any fees or other charges before they ever put the money in your hands.
Change your money habits
One of the biggest reasons payday loans have received such a bad rap is the fact that borrowers often find themselves caught in a repeat-borrowing cycle with their lenders. In other words, they borrow too much money to pay back in the approved time frame, and feel compelled to borrow more money to cover the costs of the first loan. This isn't the payday loan company's fault. Many times, this can be avoided with some simple changes to the way they manage their money.
Never borrow more than you can safely pay back by the due date, even if the lender offers you more. Also, prioritize your payments. If you have other bills due at the same time as your loan repayment, know which ones you should pay first, even when money is tight. Cut any unnecessary spending, at least until you can get the payday loan paid off, and if you aren't already on a household budget, create one. This will not only help you with repaying your payday loan, but it will help you manage your money so that you can begin to build a savings safety net for future financial emergencies.
Unexpected expenses can be safely managed with a payday loan, especially if you take the time to do your homework. Know your lender, read the fine print, and make smart money choices so you'll always have a positive payday loan experience.