As of early 2020, 49% of Americans are expected to live paycheck to paycheck. If this is the case for you, then unexpected costs can quickly set your finances off.
Emergencies can quickly clear out your bank account, leaving you desperate for any way to get quick cash. Many will borrow money from friends or family, or they’ll try to get a loan from the bank.
But if you’re employed, there’s one extra option available to you: payday loans.
Are you wondering, “When should I get a payday loan?” If so, you’re in the right place. Here are 3 signs this could be the right answer for you.
1. You Need Money Fast
A huge sign you should get a payday loan is if you need money fast.
Traditional loans can take a while, from the application and processing to the approval and disbursement. By the time you get your money, you’re probably already in huge trouble.
With payday loans, it’ll take around 24 hours from application to disbursement. It’ll definitely help you out in a pinch, especially if you have an unexpected auto repair or medical bill pop up.
2. You Only Need a Relatively Small Amount
A good sign that you should get a payday loan is if you don’t need a huge amount to tide you over. Payday loans are considered small loans, since the maximum amount you can borrow is around $1,000.
Other personal loans allow you to borrow much more. But why max out your loans if you don’t need to? Borrow the minimum possible so you avoid going into a cycle of debt.
3. You Can Pay It Back ASAP
A huge drawback of payday loans is they come with major fees and interest rates. For example, you’ll have to pay $15 per $100 borrowed, more or less.
In addition, the interest rate can be up to 400%! That’s literally more than 10 times more than credit cards with the highest interest rates.
As you can see, if you borrow with a payday loan and don’t repay the full amount within the specified period, this debt can quickly get out of control.
Many people who take out payday loans find themselves taking loan after loan to cover the last one. It becomes a difficult hole to get out of. So make sure you’re fully confident you can pay back the initial payday loan before taking one out.
When Should I Get a Payday Loan? It Depends
Now you know some answers to the question “When should I get a payday loan?”
While they’re not right for everyone or every circumstance, payday loans can definitely come in handy. So if emergencies have cropped up, you’re short on cash, but you’re employed, payday loans are worth exploring.
However, make sure you can repay the full amount as soon as possible. If you can’t, you just may end up in a never-ending cycle of debt.
If you’d like more advice on personal finances, then be sure to check the rest of our blog out!