It is a well-known fact that payday loans are quite expensive. Borrowers end up repaying at an interest rate that may reach several hundred percent. For instance, borrowing $100 may cost you $20 in fees over a period of just two weeks. This may not look like much, but what if you borrow $1,000? On average, you will pay at an annual percentage rate of around 430 percent.
The problem with this type of loans is that they are not a solution to your financial hardship. Taking out a payday loan will no help you deal with your financial problems. Given that these loans are offered with a very high interest rate, your expenses increase. A payday loan can only work well as part of a short-term strategy. It makes sense to take out a payday loan as to cover the cost of an urgent car repair, for example. You risk your financial wellbeing if you take out payday loans regularly. Retailers and banks might be unwilling to deal with you. Moreover, you financial institution may take steps to sue you, or your account may be sent to collections. Your credit score will be compromised.
What are the alternatives to payday loans? One is to have an emergency cash fund in the form of savings in a savings account. And why do you need one? Persons who do not have savings may have to take out a payday loan or another loan with an unfavorable interest rate and terms. An emergency cash fund allows you to manage your finances better. You have more options to choose from with cash on hand. You need liquid cash, so you may open a savings account or a money market account. Money should be easy to access, without excessive costs, delays, risk, or penalties. Of course, you should think of how much is enough (how much to stash). This depends on the amount of money that will make you feel secure. In general, you should have enough money to cover between 3 and 9 months of your living expenses.
Building a good credit score will make it possible to apply for loans with the mainstream lenders. There are many ways to build credit, be it by applying for a secure credit card or a department store credit card. You should borrow in moderation and make on-time payments. You may want to apply for a signature or unsecured loan with some bank or another financial institution.
If borrowing is not an option - even from friends and relatives, you may want to pick up a second job as to increase your income. This is another way to build an emergency cash fund. Finally, if you have accumulated excessive debt, one option is debt modification.
The problem with this type of loans is that they are not a solution to your financial hardship. Taking out a payday loan will no help you deal with your financial problems. Given that these loans are offered with a very high interest rate, your expenses increase. A payday loan can only work well as part of a short-term strategy. It makes sense to take out a payday loan as to cover the cost of an urgent car repair, for example. You risk your financial wellbeing if you take out payday loans regularly. Retailers and banks might be unwilling to deal with you. Moreover, you financial institution may take steps to sue you, or your account may be sent to collections. Your credit score will be compromised.
What are the alternatives to payday loans? One is to have an emergency cash fund in the form of savings in a savings account. And why do you need one? Persons who do not have savings may have to take out a payday loan or another loan with an unfavorable interest rate and terms. An emergency cash fund allows you to manage your finances better. You have more options to choose from with cash on hand. You need liquid cash, so you may open a savings account or a money market account. Money should be easy to access, without excessive costs, delays, risk, or penalties. Of course, you should think of how much is enough (how much to stash). This depends on the amount of money that will make you feel secure. In general, you should have enough money to cover between 3 and 9 months of your living expenses.
Building a good credit score will make it possible to apply for loans with the mainstream lenders. There are many ways to build credit, be it by applying for a secure credit card or a department store credit card. You should borrow in moderation and make on-time payments. You may want to apply for a signature or unsecured loan with some bank or another financial institution.
If borrowing is not an option - even from friends and relatives, you may want to pick up a second job as to increase your income. This is another way to build an emergency cash fund. Finally, if you have accumulated excessive debt, one option is debt modification.
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