There has been a lot of criticism against payday loans in recent years, yet many people continue to take advantage of them in their hour of need. If you are in need of fast cash, you may be wondering whether taking out this type of personal loan is okay, or if it will only lead to more problems in the future. The answer to this is that it depends. It depends on all of the following:
- Your reasons for taking out the payday loan.
- Your ability to repay this personal loan.
- The lender you choose to extend your loan.
Not every payday loan you come across is going to bite you in the rear end in the future. Though many people would not want to admit this, there are some instances in which this type of personal loan can actually affect your life in a very positive manner. When it works out well, the borrower has the right intentions for taking out the loan, is able to pay the loan back within the agreed upon time, and chooses a reputable, honest lender from the start.
When it doesn't work out well, the borrower does not think through their choice of lender, their ability to pay back the loan, or the amount of the loan. They simply go in and borrow as much as they are allowed to borrow, and then find they struggle to repay the loan. This is when a predatory lender will continue to issue loan on top of loan, substantially increasing the amount of money owed.
It can get to the point where borrowers are spending a large percentage of every paycheck at the payday loan office, trying to pay that mounting debt off. It essentially becomes another monthly bill, which exacerbates the financial troubles, rather than relieving them.
While the thought of that happening is scary, and many people certainly do get trapped with this type of personal loan, it doesn't have to happen to you. There are many people who do use these loans successfully. These are the people who think out their ability to repay the loan before they even contact a payday loan lender.
Since a personal loan is considered a "payday loan" if it offers money on the basis of a person's paycheck alone, many lending institutions fall into this category of loan. They cannot all be bad, and they are not. What is bad is the way they are sometimes used by borrowers. This is good news, because it means you can use a personal loan of this nature responsibly. You can do it without getting into future trouble, and without turning a one-time loan into a monthly obligation.
Responsible use of a payday loan starts with only taking out a loan if you really need it. Take the loan for the amount you need, rather than the highest amount you can get from a lender. Make sure you have a way to pay the loan back, and that you understand when it will be due. Figure out the amount to be repaid with interest before committing to the payday loan. Do these things, and you can use a personal loan without future troubles.