Bloggeron

It’s a fact that just about everyone, everywhere runs a little short on money from time to time. Sometimes, we just need a little cash to hold us over until the next pay day. So, unless you are a millionaire who is financially independent and has no bills, chances are you’ve needed some type of short term cash loan at some time. These loans can save you or they can make your life miserable.

There’s absolutely nothing dishonorable about running out of short term cash. Maybe you have more bills than you have money at the end of the month. At times like this, there’s nothing wrong with acquiring a short term “pay day loan.”

If you’re not familiar with the term “pay day loan,” here’s what it is: a very short term, and usually small amount, cash assistance loan that is ideally paid back to the person or business that gave the loan at the time that the borrower is paid his or her next paycheck. In most cases, this is within a two-week period.

So, if you borrow, say, $200 today, which is Thursday and your next pay day is next Wednesday, you will be expected to pay back the $200 plus either a set fee or interest, by next Wednesday after you receive your pay check.

Sounds simple, right? It is unless you don’t have enough money to pay back the loan after your next pay check. Then, you’ve got a problem because you are obligated to pay back the loan in full. What happens now? Here’s where people get themselves in financial trouble.

If you don’t have enough money to pay back the loan in full but you do have enough to pay about half of it, you can often simply borrow the other half ($100 + fee or interest) and carry the loan forward until the next pay check.

If you do this, you may not have enough to pay the loan off after the next pay check either. Then the cycle repeats itself and before too long, you owe more than you borrowed originally and you certainly don’t have enough to pay that back.

In other words, you have entered a perpetual financial obligation that gets deeper and deeper unless you pay it off in full.

There’s a good chance that you’d have to borrow from another source in order to pay the loan off in full so the cycle begins again with another lender if you can even find one.

This type of irresponsible behavior can often be the beginning of a life of misery for those who fall into this trap.

The interest on these loans is usually quite a bit higher than loans from traditional loan institutions such as banks, however, if you do not have a bank account or your credit rating is very low, you probably won’t qualify for a traditional bank loan.

Also, most traditional loans won’t lend you money if you don’t have some type of collateral to offer such as money in your account or something else of value that the institution can use to sell in order to acquire they’re money if you default on your loan.

The reason that most “pay day loan” companies are willing to loan you the small short loans is because the vast majority of people make some type of effort to pay back the loans and for such a short period of time, the money that they make from the fee or the interest is a nice profit so the risk is minimal.

If they can get you to borrow from them repeatedly, they will, in a relatively short period of time, make more off of you through continued loans than they originally lent you. The only time they really lose money is if you just default right from the start.

If you do though, be warned, they will hunt you down and hassle and harass you as much as legally possible and your credit rating will fall to the basement. They will also put out the word on you that you cannot be trusted to pay back loans and your chances of acquiring even small short term loans in the future, when you need them, will be very, very low.

Loaners don’t like to be cheated and that’s what you’re doing if you take their money and run. They will make every legal effort to get their money back and you will probably suffer for your indiscretion.

So, how does one get a pay day loan and stay out of trouble? In short, you don’t. You simply don’t even get a pay day loan unless you have every intention and the means to pay them back on time.

Here’s the breakdown on one of these loans. Let us say that you need to borrow $1000 until pay day, which is 8 days away. You borrow the money with the promise to pay it back plus $100 interst on that day.

You pay a few bills and buy some gas and groceries within five days, however, after the groceries and gas, you still don’t have enough to pay all of your due bills. You’re still short by about $300.

Then, on the day before you’re supposed to pay back the loan, your car breaks down and you have to have it towed which costs you $50 that you had to borrow from a friend. On pay day, you get paid and grudgingly pay back the $1100 you borrowed but now you only have $500 to get you through until the next pay day.

Your car is going to cost you $1000 for repairs and you’re going to have to rent a car until yours is repaired which will be 3 or 4 days (if you’re lucky). Now what?

Well, since you’ve become a good customer of the pay day loan company by paying back your original loan plus the interest, you’re eligible for a $1500 loan which you take.

In two weeks you will owe them the $1500 back plus interest and you still have to pay past due bills and your bill for the car repair. You’re getting in deep and this could continue. Get the picture?

This is NOT how you should control your finances nor use a pay day loan. This is the kind of example that shows how people get bogged down in debt and wind up so deeply indebted that they essentially cannot get out.

They often quit paying their bills so that they can try to catch up and, in doing so, wind up with creditors calling all the time and more and more bills, interest and debt accumulating than they are able to pay. This is not what most people consider a good lifestyle.

A pay day loan is a good short term method ONLY if one gets the loan for the exact amount they actually need rather than the maximum that is offered. Keep in mind that you should not get a loan for more than you can comfortably pay back and have some money left for living expenses and bills.

For example, let us say that your pay check is $1500 and you know that your due bills amount to about $1200. This leaves you $300 until the next pay day.

By the time the next pay day comes around, you should not have as many bills as you paid the majority of them with this pay check but you will have a few small ones that total about $400.

That will leave you $1100. You should only borrow enough cash to get you by with the minimum of expenses until pay day. In this case, you should only borrow the amount that you have left in cash this time which would be $300, in order to get you through until the next pay day.

You may have to sacrifice some luxuries such as eating out, entertainment or other non-necessary items but you will be able to survive and pay back your loan when it comes due. On the next paycheck, you should still have the $1500 plus however much you were able to save by being frugal and so you won’t have to borrow any money to get you by.

By the time the next pay check arrives, you will be back on your feet providing that no huge emergencies occur that force you to borrow again.

The secret to “getting ahead” is self-sacrifice. Not forever but for short periods of time, so that you can accumulate some saved cash. Then you only have to get a pay day loan if you run a little short.

If you use good, sound financial management, you should never have to borrow money unless you have an emergency.

Don’t borrow the maximum amount that you can get. That interest adds up and you never know when you’re going to have an emergency where you need cash.

Be good to yourself but be frugal and you may not need a pay day loan.

When you do need a pay day loan, be responsible and don’t go overboard, otherwise you’ll get yourself in a financial mess and it could take years to dig yourself out.