Study the Loan’s Terms and Conditions
There are many contracts that are classified as onerous; meaning one-sided and tends to favor the other party. Usually this happens when the other contracting party just affixes his signature, let’s say on a loan. And mostly, loan contracts are drafted by the lender ready to be signed by the borrower. Onerous loan contracts like payday loans have provisions that are unfavorable to the borrowers. This can be avoided by going over the terms and conditions before negotiating the loan. If you will not study it closely, you will be caught in a debt trap that payday loans are known for.
Why would you enter the trap unknowingly?
Your desire to get out of the financial fix as soon as possible draws you to come to the rescue of payday loans. And if you did not study well the implications of borrowing money from this personal loan you will be led to blindly apply for the loan despite the high interest it bears. Without any preparation whatsoever, you will just be interested in a solution to meet your instant cash needs.
You will be left with nothing
And when it comes due, you are left with nothing after paying the loan with interest. This will bring you to another instant problem more complex than before because of the higher interest rates you will be facing than the first time you signed up for this cash advance. Payday loans are debt traps to borrowers. You have been caught off guard because you forgot to prepare for this eventuality. This has been the case of many individuals who never thought that borrowing from payday loan is a nightmare of interest piling up to drown them later.
Better be prepared and refuse to be chained
While payday loan can best serve the purpose in borrowing from it, total reliance on it should be avoided. A very high interest it charges should discourage you from using it in the first place if you can find other sources. It is only when you fail to identify another option that you should resort to this service.
Check Out the APR
Paying a conventional interest rate of only 15% is a drop in a bucket compared to 700% that comes with payday loans. Imagine how much you could save if you are lucky enough to find the alternative. However, payday loans were cleverly designed for the purpose of meeting your emergencies in times when your finances are at the lowest and inadequate. Make it your objective to free yourself from the payday loan chain soonest if ever you cannot avoid using it.
Use solid budgeting
Nothing can beat a better financially prepared individual. If you have the commitment not to be booked forever to payday loan, good budgeting will keep you afloat even during economic crisis and can get out of it soonest.
Look for some Alternatives
Prepare a list of all your possible sources of cash including those undeclared. This covers your salary income and cash earnings from other sources of activities like business or investments. Then write down all your expenses and payables excluding those items falling under your “want category”.
Engage Your Family
You must honestly draw up this list together with your spouse in order to arrive at a more realistic statement of cash receipts and cash disbursements. The ending balance will show you how much you will have at the end of the period that you wish to cover. Based on this figure, you can map out a well-laid plan how to escape from the clutches of payday loans ahead of time.