When Should You Use a Payday Loan Online?
It's a very simple to determine when to use a payday loan online - you use one when it is the lowest cost alternative.
That is use it to avoid: expensive late fees, re-connect fees, NSF fees, bounced check fees or damaging your credit score , short term pain-long term gain
You maybe wondering how a payday loan could be the lowest cost alternative when making any kind of payment choice.
With an interest rate of 391% on an average transaction how could this be a wise decision?
Believe it or not it can be.
Save Your Credit Score - Prevent Missed Payments
A payday loan should be used to PREVENT missing credit card, auto or utility bills. For example, all 30 day late payments to credit cards are reported to the major credit bureaus immediately - missing payments will haunt your credit score for at least 7 years - costing you much more to get loans down the road!
For example, borrowing $200 from an online payday loan provider to pay a credit card bill will cost you $15 per $100 or $230 total ($200 for the original amount borowed plus the $30 fee) due in 2-3 weeks.
Late Payments - The Not So Smart Alternative
Being late by 30 or 60 days will drop your credit score - by as much as 25 points per each 30 day late - causing you to qualify for a much higher interest rate when you go to finance a car or get a mortgage loan. In the case of the home loan, were talking spending tens of thousands of dollars extra over the life of the loan.
Use a Payday Loan When...
- Need cash to repair your car in order to get to work
- Prevent missing credit card payment
- Prevent missing an auto loan payment
- Prevent missing a mortgage payment
- Prevent missing a utility bill that would require a reconnect fee
- Prevent overdraft charges
Using a payday loan to prevent the above situations will actually save you money and prevent your credit from being damaged. Think about the LONG term cost before deciding against a payday loan.
Don't worry about The APR for Payday loans
A lot of experts get hung up on the extremely high APR (annual percentage rate) that is typical with the quick cash and payday loan business.
Of course, 391% is ridiculously high but remember this is a 2 week loan, not a 30 year mortgage! Payday loans are intended to be a one time solution to your cash problem - not a revolving payment.
So spending $30-$40 one time to prevent spending thousands of dollars down the road is just plain smart.
More info: Bad credit lender