With all the talk about payday loans lately, it’s a good idea to know exactly what you’re dealing with if you are planning to take out one yourself. While some people have tried to paint payday loans in an excessively negative light, the reality is that they are actually quite the useful tool when you’re in a situation that calls for them. And according to stats, a payday loan is technically not even a high-risk product compared to other types of loans on the market.
The negative impression could be coming from people who don’t know how to take care of their finances properly, and end up finding themselves in deep financial trouble as a result of that. These are the people that are most likely to take out a payday loan in the first place too, and as a result, the bad situations are all you hear about in the press on a regular basis.
They’re Not Illegal
For some reason, some people seem to associate payday loans with loan sharks. There’s nothing illegal or predatory about a payday loan – it’s just a short-term tool to cover emergency expenses when you have no other options. They are completely legal though, and are often offered by lenders who work with traditional loan products as well. In fact, the payday loan market is among the most tightly regulated sectors of the lending industry, but more on that below.
They’re Not a “Luxury Fund”
The fact that it’s so easy to take out a payday loan can occasionally give you the wrong impression. It’s not a loan that you should be taking out on a regular basis to buy things you can’t afford immediately. If you can afford to wait until your next salary comes through, then there’s no reason to take out a payday loan in the first place. That’s another reason you hear about people with problems resulting from payday loans, too. They simply don’t use them the way they’re intended to be used.
They’re Not Free Money
On a related note, don’t treat a payday loan as an extension of your regular salary. You’re still paying that money back in the end, and sometimes the extra charges and interest rate can result in you losing a big chunk of your anticipated salary. It makes no sense to see a payday loan as “free money”, and yet, this is exactly what we see among some people. You need to have a responsible mindset and only take out a payday loan if you have a problematic situation that you can’t fix in any other way.
Repaying Is Not Impossible
As we mentioned above, the media loves to talk about people who’ve had their lives ruined because of payday loan abuse. But one look at most of those stories is often enough to paint them in a different light than what the press might be trying to push through. The thing is, a payday loan is not impossible to repay. If it was, it wouldn’t be legal in the first place.
The difficulty in paying it back is associated with poor planning and a lack of financial responsibility in most cases. As long as you know what you’re getting yourself into, and use all resources available to you to their full potential, there’s nothing really bad about taking out a payday loan.
The Market Is Regulated Tightly
As we mentioned above, there is actually quite a lot of control over payday loans in most parts of the world where they are available. You can expect your lenders to be regulated tightly by authorities, and if you notice anything unusual about the way they’re handling your deal, you can easily report that incident to the appropriate legal entities. Because of this, you can also expect most payday lenders to be very transparent in the way they work with you, and there’s little possibility that you’ll get misled about any factors of the deal. No responsible lender would want to jeopardize their own business in this manner, after all.
So the next time you’re in urgent need of some extra money, don’t completely disregard the option of taking out a payday loan. It might not be the ideal solution to every situation, but it definitely does have its appropriate uses, and can work very well if you play your cards right. And in most cases, a payday loan is something you’ll only need to work with once. If you fix your situation afterwards, there’s not much that can go wrong that would require you to get another one.