As the holiday approaches, it’s easy to flip in those dollars to get a pleasurable experience. Yes! You need to have some fun; think of the stress you went through during the workdays, but taking a payday loan is the wrong choice. It is the easiest way to get yourself trapped in debt. You’ll find yourself paying the holiday bills long after the holiday ends.
Payday loans can be considered for emergencies, but they are never a good remedy for a financial fix, not to even think of a holiday.
The Debt Trap Of Payday Loans
A Payday loan is a short-term loan, specially made for emergencies and paid back on the next payday (within two to four weeks of taking out). Because it requires no security, it carries a high-interest charge.
When you can’t pay off your loan, your lender rolls over the balance into a new payday loan, thereby incurring additional fees and more interest charges. The more you roll over, the more your debt keeps increasing.
With time your loans culminate into a large unpayable loan, leaving you no choice but to file for a Payday loan consolidation.
What Happens When You Take a Payday Loan?
When you take out a Payday loan:
- You will give the lender a postdated check. This check will include the loan amount plus the interest.
- Authorized access to your bank account.
- Then the lender gives you the cash.
- Once the loan is due, the lender will cash the check out of your bank account. You can extend the loan if you don’t have enough credit in your account. You must know that every loan payment extension equals an interest increase.
5 Smart Ways to Avoid Payday Loan Trap This Holiday
Know Your Disposable Income
Your disposable income is the money left after you’ve paid for your basic needs and tax. After you’ve removed your basic needs and tax, the money left is what you can use for the holiday expenditures.
Plan for Your Holidays and Stick to Your Budget
Spending without a budget plan can lead you to borrow and eventually make you a financial mess. To avoid this, plan for your holiday and stick to your budget.
Ask for an Advance Payment On Your Next Paycheck
Instead of taking a payday loan, ask your employer for an advance payment on your next paycheck. This way, you’ll spend wisely, knowing you are spending your paycheck.
Take a Loan From a Family Member Or a Friend
Even if they charge interest on payment, it is still better than getting help with payday loans.
Borrow From Your 401(k)
A 401(k) plan is company-sponsored retirement savings account for employees. Your 401(k) is your retirement savings account disposable for your use. Instead of payday loan help, borrow from your 401(k).
Conclusion
If you’re considering taking a payday loan for this holiday, it’s time to take a U-turn. As helpful as it may seem, a payday loan will make you pay more in interest and fees than the actual money borrowed—it is a trap.
If a payday loan is your only option for a thrilling holiday, then you are better off without the holiday.
