How Do Payday Loans Work – Dangers and Alternatives

If you happen to seek advice from your friends, then you’ve probably heard people say that payday loans are always bad. Then it’s usually where the conversation ends. But that doesn’t really solve any of your problems cause chances are, you’re still going to need the money – which made you think of considering a loan in ht first place. In this post, we will be discussing a lot about payday loans, what problems are to be expected with them, and somewhat get into the reasons why a lot of people online payday loans them bad. Along with it, I will be showing you some alternatives besides taking a payday loans as well.

The Dangers of Payday Loans

1. It’s A Vicious Cycle

Truth is, most of us have had money problems at least once in our lifetime. Emergencies always come and we always have to find ways to settle it. Your car will break down unexpectedly. A medical emergency that comes along with necessary expensive medications may hit you in down time of yours. Or simply, anything can happen at any given time.

This may be true, but being consistently broke before payday is just not an excuse. We should not be living in a lifestyle where we will be forced to live paycheck to paycheck. Unfortunately, these types of loans can get you into a never-ending cycle of paying loans. These cycles are the ones that are difficult to get out of, not only because they are that tempting, but also because they carry high interest rates.

2. Extremely High Interest Rates

The interest that payday loans have can destroy your finances. Payday loans are just plainly very high, sometimes obviously giving the impressions that they are expensive because they prove to be the only options you’re going to have. This is basically why payday loan companies are very profitable, because they charge very high rates when selling loans to vulnerable people in their most vulnerable times. If you somehow feel like you desperately running out of options and basically needed a loan, then you must consider peer to peer lending first before going into dangerous loans.

Now that we basically have an idea on how payday loans can destroy our finances dramatically, we now move on to discuss and figure out how to deal with the causes of your need for loans in the first place.

3 Tips on How to Avoid Payday Loans:

1. Budget in Advance

This could be the easiest solution to avoid having financial problems. But don’t be intimidated with this concept though, budgeting doesn’t really mean you need keep track of every single penny. Budgeting simply means setting aside an amount in every paycheck that you get, to cover your usual expenses as well as for a personal emergency fund, in case you don’t have one. You can make a budget by saving as much money every payday to make sure you have enough funds for both expected and unexpected expenses you will be having. It’s really all about discipline.

2. Ask for More Hours

You could be great with budgeting, but you just might not be earning enough money. You could be more flexible with your budget by looking for ways to increase your income through having double jobs or working longer hours. If you happen to have a good work experience and track record, then there will be more work available for you. You don’t really have to stress out applying for other jobs, or try to tighten up your budget. If your hours happen to be maxed out at some point, you can opt for getting a raise in your current company instead.

3. Find a Second Job

Sometimes though, life just needs you to suck it up and find a second job. One option would be to turn into your talents and make it a small business venture. For instances, if you happen to be good with photography, you can make be a freelancer and offer photography services during weekends or on your day off. Or you can just file a leave of absence every time you have a booking. Having an alternative source of income really does wonders for your finances. It also gives you another stream of income to build an emergency fund and a budget you can spend with your hobbies.

Of course, along with extra work come extra sacrifices (especially with time) as well. If you’re in your early 20’s then this might not be a big issue, since you have the whole time for yourself and a whole bunch of energy. But if you are with family though, the sacrifice of time might be something to be considered with. Ultimately, it will all boil down to your personal situation if a second job is a decision that’s right for you.

Final Word

In reality, payday loans are one of the options that one needs to avoid as much as possible. Companies offering loan services are trying to take advantage of your financial situation in order to raise huge profits. By following these tips, you may be able to avoid being in a trap of needing a payday loan badly. And if your ever find yourself in a very desperate situation ad in need of a loan badly, then try to opt for better loan options such as peer to peer lending.