Payday loans can be a useful tool in a money emergency. Find out when it makes sense – and when it might not.
Just about everyone has been strapped for cash at one time or another. A family emergency or some other out-of-the-blue expense leaves you short, with no idea of how you’re going to make it through until your next payday. Where can you turn for the cash you need to stay afloat?
Situations like these are exactly why payday loans were created – but hold it right there before you rush off to apply for one. A payday loan may help you get by in the short term, but could it snare you in a debt trap? Will you get caught up in a never-ending cycle of high interest rates, hidden fees, and growing debt? Considering the stories that have been put out there by some payday loan industry critics, it’s natural (and smart) to ask those questions.
The fact is, payday loans can be a quick and simple financial lifesaver if they’re used correctly. In exchange for a one-time fee, you borrow the money you need and repay it on your next payday. The key to making one of these loans work for you lies in asking yourself some important questions first. Why do you need to borrow? How quickly you can pay that money back? Have you zeroed in on a reputable lender? Let’s take a look at those questions and get to the bottom of why they matter.
Payday Loan Question #1: Why do you need to borrow money?
Payday loans are meant to be a short-term loan solution to an out-of-the-ordinary cash emergency. Getting a payday loan so you can pay for repairs to get your car running again is appropriate. Getting one because you’re not able to cover rent, utilities, credit cards, and other regular payments month after month? Not so much.
People who find themselves applying for one payday loan after another to cover routine, ongoing expenses may quickly find themselves in over their heads. If your situation involves a long-term cash flow problem instead of a one-time, unexpected cash shortfall, you may want to seek credit counseling or some other type of financial solution.
Payday Loan Question #2: How quickly can you pay the money back?
Repayment is typically due around two weeks after you receive funds from a payday loan. Before you apply, ask yourself whether your next paycheck will cover the payback amount (including the fee) without making you fall short on your other bills. If you find yourself needing more time, most lenders provide “rollover” or refinancing options – but this should be considered a last resort.
To get a clear look at where you finances will stand when the repayment date rolls around, make a list of the bills and other financial obligations that will come due between your next payday and the payday after that. Add up the total and subtract it from your regular take-home pay amount. Is the amount you’ll have left over enough to repay the amount you want to borrow plus the payday loan fee? If not, you could find yourself right back in the same boat during your next pay cycle – and the cycle after that.
Payday Loan Question #3: Have you zeroed in on a reputable payday loan lender?
If you’re shopping for a payday loan, chances are you don’t have time to wait around for the funds you need. Resist the temptation to go with the first lender you find. Look for a licensed lender that’s committed to treating you the way you deserve to be treated – with friendly service, clear explanations, and no hidden fees.
Your search doesn’t have to take a lot of time. Cut to the chase by looking for a lender that belongs to the Community Financial Services Association of American (CFSA) – the trade organization of Check ‘n Go and other reputable payday lenders. As a condition of membership, CFSA members pledge to follow responsible lending practices. To find out if a lender belongs to the CFSA, look for the CFSA seal on the lender’s website.
You don’t just have to take the CFSA’s word for it, either. Before you make your final decision, check out what customers say about any lender you’re considering. Trustpilot is an independent online community that gives consumers a chance to review the service they’ve received from Check ‘n Go as well as companies from a variety of other industries. The site includes hundreds of reviews. Based on the reviews and ratings from its customers, Check ‘n Go’s overall rating currently stands at “Excellent.”
No matter which lender you choose, remember that taking a little extra time to find a lender you can trust is well worth it.
Borrow Smart – and Build a Better Financial Future
Borrowing when you have a need can be a useful financial tool. Just like mortgage loans, student loans, credit cards, and other types of debt, payday loans serve a purpose. If you’re considering one, just be sure to ask yourself the right questions before you jumping in.