Sometimes fast payday loans are the perfect solution. Other times, not so much. Here’s what you need to know about when it’s a good borrow or a bad one.

We’ve all heard stories about people who have taken out fast payday loans. But then they haven’t been able to repay on time.

Maybe they took out $1000, and ended up owing $4000.

Fast payday loans have gotten a bad reputation from people using them in the wrong way. But they can be a great tool – if you know how to use them right.

Read on to find out the right – and wrong – way to use payday loans.

Why would you want a payday loan?

Everyone has those situations where a bill appears that wasn’t planned for.

Maybe your car needs an emergency repair.

Or maybe there was a hiccup at the bank and a bill you thought was paid actually wasn’t. So you used money that you thought was spare to pay for something else.

Only the money wasn’t actually spare. And now you can’t pay that bill.

In those circumstances, fast payday loans might be the ideal solution. It’s even possible to borrow responsibly.

Often you receive your loan as soon as it is approved. So you can fix your emergency and know that it’s all under control. That peace of mind is worth the cost of the interest.

And you also don’t need to actually speak to anyone. You can apply for the money as and when you need it.

And some lenders even reward good customers. If you always repay a loan on time, then they’re more likely to lend you money in future.

Don’t forget, a check that bounces will affect your credit score. So it might be better to take the hit on paying interest and choose fast payday loans.

Repaying a loan on time can also help your credit score. It proves you can handle debt and manage your money.

Be aware of the downside.

Fast payday loans may have advantages, but they come at a cost.

The interest rate is likely to be much higher than that of a small loan or overdraft from your bank.

In some cases, you might be better off using the cash advance feature on your credit card.

And if you can’t repay on time, you’ll incur extra fees. If you can’t repay the loan and its interest on the agreed day, then don’t take out a payday loan.

Those extra fees will also generate interest and the amount you need to repay can blossom into a monster overnight.

And not repaying a loan on time can have severe consequences for your credit score. That’ll make it much more difficult for you to get any kind of credit in future.

So should you avoid fast payday loans?

Not necessarily.

As we’ve said, they do have their advantages for responsible borrowers.

New Zealanders owe an estimated $15.25 billion in personal loans. So you’re far from the only borrower.

Maybe you’ve had a bad experience with them in the past. You can always look at why it didn’t work out.

Did you borrow more than you could afford to repay? Maybe you just need to lower the amount you want to borrow.

The maximum available is a guide. You don’t have to borrow that much.

But do you find that you’re taking out payday loans every month? Perhaps you keep running out of money a week before payday.

Then fast payday loans are not the solution. Better management of your money is your only way forward.

Otherwise, you run the risk of falling further into a black hole. You’ll just pile up interest that you can’t repay.

Some people use payday loans to pay off other loans. Why would you build up that much interest?

If the interest you’ll pay on the first loan is less than the interest on the payday loan, then don’t take one out.

The same goes for your credit card. If it’s maxed out, then start paying off the balance in smaller chunks.

If you’re thinking of using a payday loan to cover a large purchase, think twice. Is it absolutely necessary?

If the item is going to help with your business, then it might be worth buying. Just make sure you’ll have enough money to cover the purchase when the loan is due.

And if it’s not necessary, then consider ways to earn extra money to pay for it. Or just use good old-fashioned saving.

You’ll have to wait longer to get it but you’ll save yourself a ton of interest.

What can I do instead?

If you’re a person who uses payday loans every month, then you need to stop and review your money situation.

You need to have more money coming in than you have going out.

You can explore the possibility of earning more money. So see if you can pick up extra hours at your job.

See what skills you have. Can you sell those skills to others? Even if it’s just babysitting around your town, that’s still extra income.

Then there’s the ability to make money through sales. Look into yard sales. Selling things you no longer need is a great way to make up any financial shortfall.

That’s a great way to earn money when you’re trying to buy a new TV or a laptop.

Or you can work to reduce your outgoings. Do you really need to spend that much on a mobile phone contract?

And can you switch from an expensive supermarket to a cheaper one? Sometimes just swapping brand names for own brand products can save you money.

Make it a habit of going looking for special offers. And collect coupons to earn savings on your shopping.

Finally, swap nights out for nights in and watch the dollars mount up. You can even get your friends involved and make it a regular event.

But use fast payday loans as a last resort.

They can be a great temporary solution to short term problems.

But don’t use them as a short-term fix for other financial issues. Otherwise, you’re just storing up more problems for the future.

If you need a payday loan and you want to use it properly, then apply now. We’ll be happy to help you.

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