A Last Resort
The best advice concerning payday loans is: avoid them, at all costs. Unfortunately, Murphy’s Law and life in general don’t always allow people to. The reason is that sometimes unexpected expenses crop up, and you have no choice but to pay them. However, an advance on your paycheck will accrue high interest.
Not only is interest exceptionally high with payday loans, but it often compounds incredibly quickly. Sometimes weekly, sometimes in periods as short as five days. Interest rates on payday loans are exorbitant, and many even say exploitative.
While certain people consider any interest to be usury, seldom is this more apparent than in the case of the payday loan. But what if your car breaks down and you’ve got a parking ticket due all within one or two days of your paycheck’s arrival? Then, to top it off, rent backhands you out of any profit for the month.
If you don’t have any savings built up, you have no choice but to pay these charges. Certainly you can go into debt with a friend, a family member, some mafioso group, or with a payday loan/check cashing center. Understandably, many choose the payday option over these other solutions.
The key to avoiding ever being in this position is to always have savings available. If you are living paycheck to paycheck now, go through your budget and consider what you can cut. The likelihood is, you spend hundreds of dollars every month that you simply don’t need to. Don’t believe it?
How often do you go to Starbucks every week? Once? Twice? Daily? If you go to Starbucks once a week and buy the smallest coffee, you’re looking at $8 a month. If you buy a $5 coffee, you’re looking at $20 a month. If you go twice, you’re looking at $16 to $40 a month. Daily? $60 to $150 a month.
Next, ask yourself how often you eat junk food. Do you spend $3 or $4 a day on it? Well, that’s $21 to $28 a week, or $84 to $112 a month. Do you buy drinks at the bar? How much do you spend? If you’re buying a drink a night, that’s a minimum of $14 a week, or $56 a month. If you spend $10 a night, that’s $310 monthly.
If you’ve got alcohol difficulties, spend $20 on a fifth and stretch it out through a week; that cuts your alcohol costs down $220 a month. Buy a can of coffee for $5 and you can cut between $3 and $145 a month from your Starbucks expenses. If you cut out junk food entirely, you can save $84 to $112 a month.
Minimum, you can cut $307 from your budget just from vice alone; and that adds up quick in a year. Do that for twelve months and you could squirrel away $3,684—that’s enough of a rainy-day fund to avoid ever needing a payday loan! But still, you may get into a car wreck even if you do that, and still have to take out the loan.
Getting Assistance When Necessary
If you do need help with payday loan debt settlement, DebtConsolidation.co offers this advice: “Set aside funds each month during debt settlement negotiation to pay your creditors once your debt settlement company successfully negotiates a lower balance.”
There’s hope, and thank goodness; but it it’s an uphill climb. Still, solutions like these can help you get the payday loan monkey off your shoulders, and help more expediently restore your financial freedoms.
The key to financial independence is discipline and foresight. But everybody messes up eventually. If you’re savvy enough to learn from your mistakes, you can avoid most situations like this in the future.