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Don’t Get Caught With Multiple Payday Loans

That sounds ominous, doesn’t it?  I am not saying that payday loans are a bad thing.  All I am saying is that they should be used properly and with caution – just like any other loan out there.  So what is wrong with having multiple payday loans?

To answer this question, it is first vital to understand the concept behind a payday loan.  Why was this type of loan created?  It is important to bear in mind that a payday loan has been designed in order to meet people’s short term financial needs.  This means that a payday loan is a sort of a stop gap measure, meant to deal with urgent needs.  In line with this, a payday loan is meant to be used only during emergency situations – that means sparingly, only when the need arises.

A payday loan is not meant to be used as the default solution for every little financial glitch that you meet.  Why not?  The answer is simple – because the money used to pay off a payday loan is supposedly the money that you are expecting to get from your salary, or whatever other source of regular income that you have.

Now, imagine this scenario.  You have an urgent financial need and you have no other resort.  So you take out a payday loan.  No problems there.  You can pay if off, say, within the next two paydays.  However, after making the first payment, you realise that you might not have enough money to last you till the next payday.  Your first instinct is to take out another payday loan to see you through.

There are two things that could happen here.  First, if you decide against taking out another payday loan while you still have one which is unpaid, you would have to make a few sacrifices here and there to make ends meet till the next payday.  Maybe you would have to do without going out at the weekend.  Maybe you have to put off that trip that you have been planning.  The point is, you do not take out another loan while you haven’t paid the first one.

Second, you could go ahead and take that second payday loan.  I can foresee problems here.  Think about it.  You are already having problems paying off the first one.  What makes you think that the next paycheck will be larger than the others?  The more likely scenario is that you would keep on coming up short on cash and having trouble paying off each payday loan.  If worse comes to worse, you might end up having to take one payday loan after the other, if only to pay off the previous one.  Do you see what I am getting at?

A payday loan is most useful if utilised wisely.  Again, a payday loan is meant to meet immediate financial needs and not as a regular source of cash to be used whenever you feel like it.  Knowing the difference will help you stay financially sound.