Over the years, payday loans have been the focus of a lot of negative press. Oftentimes, the negative attention that these short term loans attract focuses on the so-called high interest rates that accompany them. However, the truth is, most of the negative experiences that people had with these loans have been the result of a few common mistakes on the part of the consumer. Learning to avoid these mistakes will allow you to benefit from the use of a payday loan or cash advance if you should ever find yourself in need of a little extra money before your next paycheck arrives.
Mistake #1: Borrowing More Than You Really Need
It can be tempting to simply take the largest amount of money that a lender is willing to give you. This is especially true for consumers who traditionally find it difficult to secure a loan due to poor credit or limited income.
While you may be tempted to borrow the maximum amount allowed by your lender, borrowing more than you actually need can be a recipe for disaster. This is because while your original intention when taking a cash advance may have been to pay a bill or cover an unexpected expense, the influx of extra cash can also lead to impulse buys that will ultimately have a negative impact on your budget.
Borrowing only as much as you need will prevent you from accumulating unnecessary debt. Limiting how much you borrow can also help to keep your interest rates to a minimum since the total amount of interest due will typically be dependent upon how much you chose to borrow.
Mistake #2: Taking More Than One Loan At A Time
While some states have already passed legislation to limit the number of active payday loans you can have at one time, there are still many states that allow you to obtain multiple loans at once. The problem with this is, nearly all payday lenders will require you to repay your loan in full on your next payday. Unless your average paycheck is enough to cover the cost of all of these loans, taking multiple loans at once will virtually guarantee you default on at least one of your loans.
Mistake #3: Avoiding Lenders When Unable To Pay
No matter how well you try and plan, the fact is, unexpected circumstances may prevent you from repaying your loan according to the terms of your original contract. Unfortunately, when this situation occurs, far too many consumers chose to try and avoid their payday lenders rather than keeping the lines of communication open. As a result, these loans will often be reported to major credit bureaus and sold to collect agencies that may choose to take legal action, such as garnishing your wages in order to recover the debt.
If for any reason you are unable to repay your loan on time, taking the initiative to contact your lender and make new payment arrangements may allow you to avoid the negative consequences that come along with defaulting on your loan.
For more details on lending terms and other questions, get in touch with a local lending service, like USA Cash Services.