Ravi Chandran
Deferred deposit loan, (also known as a payday loan or cash advance loan), have become an increasingly popular method for consumers to access fast cash.
By: Hitesh Khan/
A payday loan is a good resource for when you are in a tight spot in terms of cash flow. Payday loan will set your finances straight until you can set it proper. Payday loan can be especially useful when you are in a bit of a financial emergency, or when you need to put up the funds for home repairs, urgent school fees or require money for an unexpected family emergency.
If you find yourself in one of these situations, a payday loan provides you a bit of comfort and allows you to pay funds upfront even when you are constrained financially. These loans are ideal for fulfilling your short-term financial requirements when an unexpected expense arises to throw a spanner in the works.
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Most payday loan lenders make sure that there is no lengthy wait before the funds go through or a stringent evaluation process to go through. But it is important to fins an established and reputable lender, who has streamlined their processes to provide their customers with emergency funds virtually immediately.
With such payday loan lenders, it is simply a matter of filling out the required documentation, before they process your claim and transfer the desired amount of funds into your account all within a short time frame.
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Secure and fast, these loans enable you to avoid charges for bank overdrafts, credit card fees and bounced cheques. In addition to this, their services help to protect your credit ratings and help you meet your financial obligations.
A payday loan however, may not be for everyone. One study shows that the average payday loan customer makes eleven transactions a year – and maintains an endless sequence of debt. If you find yourself caught in the payday loan cycle, analyse your financial situation in its entirety, and set reasonable and achievable financial goals.
Before taking a payday loan, understand your earning potential. Ask question like, “Can you work overtime, obtain a second job, or turn a hobby into income?” You should also review your expenses, and see if you can reduce or eliminate anything in the short or long term.
Those that need payday loans should review their debt, list everything, before setting their priorities. Because the interest rates on payday loans are well above other types of debt, treat it as a financial priority. It is important to track your spending and regularly review your budget. It is also important to commit yourself to using as payday loans as less frequently as possible.
If you are using payday loans because you inadvertently overdraw on your account, consider overdraft protection. Develop a savings plan. Three to six months’ worth of expenses in an accessible savings account is recommended, but anything is better than nothing. A hundred dollars set aside for emergencies can save you a trip to the payday loan company – and a tremendous amount in fees.
Understand the root of the problem. Are you spending beyond your means because you’re income is insufficient to live on, or because you’re spending more than you need to on non-necessities? You must also consider if there are other ways to generate money.
When difficult financial situations do happen, consumers should consider all other available options before choosing to use a payday loan.
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For example, you can ask your bank for a loan. The interest rate cap for unsecured loans is currently high, but it is still significantly lower than a payday loan. You could also request an extension on what you owe. If you have had a good payment history, this may be the best option. Ask about finance and late charges for delinquent payments and payment plans.
If you have a credit card, in an emergency, consider using a credit card to pay your bill. A cash advance on your credit card is often more expensive than a credit card purchase, but still an option. Check with your credit card company to compare rates.
You could also borrow from a friend or family member. If you take inventory of your belongings, you may be able to sell an asset to raise fund for a pressing need. Some employers will also give an advance on a salary. Check with your human resources department for specific regulations.
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