Budgeting For Beginners

Payday loans sometimes get a bad rap, but it really shouldn't be that way. A payday loan only becomes a burden when it's used irresponsibly. If a borrower adheres to the original terms of the contract, a payday loan is a viable resource for obtaining cash in an emergency.

When You Shouldn't Take a Payday Loan

• If you're constantly strapped for cash and already living just paycheck to paycheck, a payday loan might not be the best option for you. Someone who's in this situation already could have a hard time paying back a loan in a timely fashion if another unexpected occurrence should happen. 
• If your job is in jeopardy, or if you are still on probation, you should probably avoid taking out a payday loan. You'll need a way of paying back your debt, and that's difficult to do without a job.
• If you're already overextended with credit, taking out any type of loan is inadvisable. Most companies who offer payday loans don't inquire about your debt-to-income ratio so you should have an idea, yourself, of how much debt you can and can't handle.

When a Payday Loan is Advisable

• If you're someone who is typically on top of your finances, but have just suffered a temporary setback for one reason or another, a payday loan is a good way to get the cash you need without the wait time and paperwork usually required by your bank.
• If you have a good history of meeting or exceeding your monthly payments on credit cards, car payments, mortgages, or other debts, you will likely do as well with a payday loan.
• If your job is secure, if you have confidence that your company is stable, and there are no layoffs or terminations in your foreseeable future, a payday loan should be relatively easy to repay. Of course, sometimes there are no prior indications that catastrophe is right around the corner, but if your finances are basically in order to begin with, weathering the storm will be easier to do.

What to Do Before You Commit

Before you sign any contract, you should take the time to read it through thoroughly first, and a payday loan is no exception. You should also run a check on the company from which you'll be borrowing to make sure it's reputable and that there are no complaints lodged with the Better Business Bureau. Lastly, make sure you don't commit to repayment terms that are going to be difficult or even impossible for you to repay. 

What to Do After You Commit

Once you've taken out a payday loan, you'll have the cash you need to see you through your particular hardship. The next step is to treat your repayment plan responsibly. If you've agreed to repay the entire loan with one payday, then do your best to meet the obligation. Re-negotiating the terms of a payday loan sometimes leads to higher fees and accumulates more interest -- two things you want to avoid if possible.

As long as you treat a payday loan as a serious financial obligation that must be repaid according to the original terms of the agreement, there's no good reason not to take one if the need arises. Just be sure to do your prep work beforehand so you know just how much you can afford, and then don't be swayed into borrowing more than you've decided upon. When used responsibly, payday loans are a great resource for those who need cash in a hurry and can't qualify for traditional bank loans. They'll see you through a hard time or two when you need it most.