The Benefits of Online Unsecured Lending Options
When you borrow payday loan products responsibly and use them as they are intended, you are almost guaranteed a good experience. It's only when borrowers turn to short-term loans for the wrong reasons that problems arise. The bottom line is, pay day products were designed to alleviate a very specific type of financial problem; a temporary cash-flow shortage. When used for that purpose, they serve their function and the borrower well. However, when borrowers misuse cash advances for deeper financial troubles, it's much like substituting a bandage for surgery. To help you distinguish when you should and should not borrow unsecured funds, we've compiled the two lists of scenarios provided below.
When NOT to Borrow
Of course, you might also find yourself in certain financial jams in which it is not advisable to turn to unsecured loans. Generally, these situations require larger amounts of cash for longer periods of time and/or involve expenses that are largely discretionary. According to research done at California State University Northridge, 76 percent of the industry's volume comes from repeat loans. Repeat loans are typically the result of a consumer originally either borrowing more than he/she can afford or borrowing for the wrong reasons.
- You want to take a mini-vacation. Any expense that is not absolutely essential to your financial survival is one that can wait till your next paycheck, which means it also does not warrant a cash advance. Vacations, concert tickets, a new wardrobe, etc. are expenses that should be covered by savings, not by borrowing.
- You need a down payment on a used car. This expenditure is likely a significant one, which takes it out of the realm of short-term advances. These products are intended to provide modest amounts of money for minor expenses. You're better off saving for large expenses like this one.
- You need money now, but know that you won't be able to pay it back until your tax refund comes through in a few months. A few months is far too long to borrow funds. You will end up rolling the balance over repeatedly and burying yourself in finance charges in the process. Ideally, these advances should not have terms of longer than two weeks.
Healthy Borrowing Situations
A payday advance is likely to help you in scenarios like the following:
- An important bill is due immediately, but you don't get paid for another few days. In this case, waiting to make the payment until you get paid will probably result in damage to your credit. Or, even worse, if the payment is for your electric or water bill, you might have your utilities turned off if you don't pay on time. A short-term loan can help in this case by bridging the gap between now and your next paycheck.
- An unexpected expense, such as a car repair, sprung up. Even if you budget well, sudden, unexpected expenses like auto repairs can come up from time to time. If one of these surprise expenses arises before you get your next check, a small loan can help you cover the bill in the interim.
- A semi-annual or annual statement is due, and you're just a little short. It's hard to remember to budget for infrequent bills, such as car or health insurance premiums. If you owe these payments and your account is just a little shy of what you need, an advance from a reputable lending company can help you make up the difference until you get paid again.