When faced with an unexpected car repair, shutoff notice, or other financial catastrophe, payday loans can save the day. Borrowing against expected income for a fee can be far less expensive than overdrawing a bank account, exceeding the available balance of a credit card, or being assessed late charges. The other options for emergency cash are equally unattractive and may end up costing a borrower far more in the long run.
Depleting Savings
When an emergency happens, the first reaction may be to rush to the bank and transfer funds out of savings to meet the need. However, depleting the only source of cash available can leave the borrower in an even worse predicament if they become unemployed. An emergency fund should not be used when the next paycheck can cover the situation unless the account is truly gigantic and the need is small. Even then, a payday loan meets the need without spending precious savings.
Using a Credit Card
Borrowing from a credit card carries with it high interest rates, especially if the person has a poor credit score. To make matters worse, not every financial challenge accepts credit card payments. If a customer is borrowing to lend the money to a family member or friend in crisis, they may also not feel comfortable handing over a credit card. Taking a cash advance against a credit card is outrageously expensive and carries fees much higher than most payday loans, making them the wiser choice.
Selling or Pawning Possessions
In times of extreme hardship, it may be tempting to pawn or sell jewelry, securities, or other possessions. However, this will net only pennies on the dollar. The amount paid for the items will be far less than their worth. Then, the person must pay even more to replace or buy back the possessions. With a short-term loan, there is no need to relinquish material goods. Borrowers can get cash by using a post-dated check as collateral.
Borrowing from Friends or Family
While it may be tempting to borrow money from a friend or family member, doing so may cause an unintentional rift. What’s worse is that borrowing from others invites judgment and comment about one’s habits and lifestyle, leading the lender to question the borrower’s finances and actions. This is no way to have a relationship. Friends and family are not to be treated like a financial institution. Utilizing a cash advance is impersonal and keeps business separate from private life.
A payday loan is quite often the perfect solution for short-term borrowing in times of financial crisis. While credit cards charge usurious or hidden fees, payday loans are transparent and straightforward. Pawn shops and selling possessions will not extract the true value of the items, leaving borrowers even poorer than before. Finally, friends and family should not be pressured to assist in case of emergency. A short-term loan is the correct choice.
Related Articles: