5 Ways To Avoid Getting Stuck In A Rut With Payday Loans
Payday loans are often used by people who need fast cash and cannot get approved for a traditional loan. Unfortunately, some of these people are already living paycheck-to-paycheck. If any additional financial emergency or situation pops up, it can be challenging to repay the loan. For this reason, payday lenders offer their customers the ability to roll over the loan. This simply means the loan is extended for additional fees.
The Consumer Financial Protection Bureau conducted a study and found that 80% of all payday loans are rolled over or renewed in two weeks. If you need a payday loan and would like to avoid rolling it over, you'll need to take the following precautions.
Don't borrow more than you can pay back
When applying for payday loans at places like Money 4 You, whether in person or online, it's important to only ask for what you will be able to repay. Even though it sounds like common sense, it can be difficult to limit yourself when there is a chance of having some extra cash on hand. Avoid the temptation to borrow more than you need and/or can repay at all costs. Only borrow what you need to cover your financial emergency, and only borrow what you can afford to pay back on time with the fees included.
Only borrow from reputable lenders that follow your state's laws
Each state has laws regarding payday loans. Payday lenders are required to follow the laws of their customer's legal state residence. Don't just assume that a lender is following the laws, especially when getting a payday loan from an online lender. Research your state's payday lending laws so you can compare them against the terms of your contract before you sign it.
Don't forget about other automatic bill payments
To get approved for a payday loan, you may have to post-date a check or give the lender your checking account information so they can debit the repayment from your account. Do not forget any other bills that you may already have arranged to be taken from your account automatically. You may need to rearrange your other automatic bill payments to make sure there will be enough in your checking account to cover the payday loan repayment on the dates specified in your contract.
Start overdraft protection for your checking account
If you opted out of overdraft protection for your checking account, it may be a good time to opt in. While there are fees when you overdraft your checking account, they may not be as much as what the payday lender may charge for a bounced check or to rollover the loan.
However, keep in mind that even with overdraft protection your bank may use their discretion and decline a payment. You don't want to use this to purposefully overdraft your checking account, but it may help protect you from overdrafting accidentally.
Briefly suspend a service until your loan is repaid
To help you be able to repay the payday loan on time, you may want to consider briefly suspending non-essential services, such as your Internet, home phone, cell phone, cable and gym membership. Call these services to see if you are able to suspend them for one or two months. If so, be sure to ask if there are any costs involved in restarting them.
Rolling over a payday loan is a common thing, but one that you may want to avoid. A payday loan rollover allows you to repay the loan at a later date, but you still need to pay the current and future fees and finances charges that get added to the repayment plan.