In a perfect world, you would always know the exact date that your car will need to be repaired and be able to budget for the expense. Your expenses would always be less than your income, allowing you to have a savings account to ensure your financial stability. Unfortunately, in the real world, cars and appliances break unexpectedly, family members fall ill, homes need to be repaired and there are numerous other financial emergencies that can shatter your budget.
When you have a short-term financial emergency, a payday loan can be a viable solution. However, payday loans typically must be repaid in full on your next payday, and the repayment must include any fees or interest associated with the loan as well as the amount you borrowed. If you have an urgent financial need and are certain that you can repay the loan in full on its due date, a payday loan could be an excellent choice. For many people, though, the short duration and large repayment prove unmanageable. They renew their payday loans or take another payday loan to pay off the first one, leading them into a cycle of debt that is difficult to escape. Therefore, before you commit to a payday loan, you might want to explore alternative payday loan options.
If you have ever taken out a mortgage, had a store finance your purchase of new appliances or financed a car, you have experienced an installment loan. However, all of these types of installment loans are collateralized, which means that the lender has the right to seize the property financed if you default on the loan.
Personal installment loans rarely require collateral and can typically be used for any legal purpose except as a substitute for student loans or business loans. Installment loans are usually repaid in six equal payments; sometimes, one payment may be a few cents more or less than the other payments. This makes it easy to budget for the payments, and after remitting the final installment, you are debt-free.
Advance loans basically combine the best features of payday loans and installment loans. The application process is as fast and easy as it is for a payday loan. However, you can repay an advance loan in installments rather than a single, lump-sum payment.
Spreading your payments over several months can help you ensure that you can meet your other obligations as well as retire the debt. Because you know exactly how much each payment will be, you have ample time to budget for the payments or find ways to boost your income to cover them.
Responsible Borrowing Is Crucial
Whether you choose an online payday loan or alternative payday loan options, always borrow responsibly. Your goal should be to get out of debt and build your savings so that you can weather unexpected expenses.
• Never borrow to cover an expense that is not an emergency. If failing to meet the expense will immediately disrupt your life, it can be considered an emergency. Otherwise, put the money you would spend on payments into your savings account and be patient until you can pay cash for the expense.
• Borrow only what you need. Many people borrow more than they need to meet the emergency, thinking that they will just put the excess money toward payments. However, in most instances, the excess is spent before the first payment is due.
• Know how you are going to repay the loan. Have a realistic plan to make your payments on time to avoid additional interest or late fees that will just put you deeper in debt. You might need to cut some expenses or find a way to supplement your income.
Used wisely, short-term loans can help you build a solid financial base. Used unwisely, they can make an already precarious situation even worse.