Payday Loan
Would a financial counselor recommend a payday loan? As a financial management tool, a payday loan can actually be useful for certain types of situations. And yes, these days there are financial counselors that include the payday loan in the suggested repertoire of devices for handling your personal finances. To find out how a payday loan can help you manage your budget, take a look at our quick guide to a payday loan below.
First, let's take a look at what exactly a payday loan is. It's a short term loan that is meant to be paid back at your very next paycheck, usually within two weeks. You pay a one-time fee and no interest for the easy to get, fast cash loan. If you don't pay back on time, you will end up paying more money in fees and interest and the loan will become very expensive.
Therefore, you must be very sure that you can pay back the cash payday loan before taking one out. That's why the payday loan lenders require that borrowers have a job with steady monthly income totalling at least $1500 per month. You must also be very aware of your personal finances because only you know how much loan you can handle, and how much of your next paycheck is already spent.
If you have been carrying a balance on you credit card, you have an area that would be flagged by a financial counselor, especially if your cash reserves are low. One of the basics of financial management for personal budgets is that everyone should have an emergency savings account. Put at least $5000 in a savings account that you don't touch unless you have an emergency that calls for immediate cash. If you have emergency medical needs that require cash, that is what your emergency savings account is for. If you need to fly somewhere in a hurry to meet a family crisis, that is what your emergency savings account is for.
The worsening economy has had great negative impact on emergency savings account across the United States. Not only that, but many Americans never had such a cash reserve in place to begin with. All this means that this country is cash poor. Even those who thought they were budgeting carefully and heeding advice of the financial counselors have found that just one instance of having to use their emergency savings account can wipe them out.
With no emergency cash, and with the economy reeling, things like sudden car repairs and credit card bills can become major problems. One late payment on a credit card can carry a $35 fee. When you consider that a payday loan costs $15 for every $100 borrowed, on average, you can see how a financial counselor will recommend a payday loan to pay that credit card bill on time. Or you can see how it might make sense to take out a payday loan to cover a car repair rather than putting it on a credit card. Credit card companies these days are also feeling the pinch, and they are raising their interest rates as well as the fees they charge for late payments and missed payments. It's best to try and avoid overusing your credit card, and a payday loan can help you out in these ways.
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