People turn to payday loans not to get one-off expenses, like paying bills, but for various reasons. Payday loans are reputable for their fast access, easy processing, and are ideal for emergencies.
This article will take you through the common uses of payday loans. But first, let’s see what payday loans means.
What is a Payday Loan?
A payday loan is a short-term, high-interest rate credit line for small cash—usually $200 or less. These loans are easier to acquire than traditional bank loans; borrowers will typically only need an income and an active bank account.
However, financial experts advise against payday loans, mainly if the borrower is likely to have problems paying back the loan in time.
Top Reasons People Use Payday Loans
1. Being Made Redundant
Losing employment can be intimidating, especially if you don’t have any other income-generating business. It can stress you out both financially and emotionally. On the other hand, payday loans can offer excellent loan services in this situation. The following are some of the benefits you can get from a payday if you’re unemployed:
- The loans are disbursed the same day
- It allows you to continue with your lifestyle as you plan a way forward
- It helps you psychologically
- It gives you ample time to search for another job
You can also use the loan to start a profitable business. However, the business should be low risk and have almost certain returns. Otherwise, you could end up in worse financial status, in endless debt cycles.
2. Loan for Debt Consolidation
Many people take out payday loans to pay off other debts. You can acquire the loan to repay a previous loan. It might also be a debt somewhere else, like a credit card. In that case, taking a payday loan might be the perfect solution, especially if its interest rate is lower than the amount owed on the other credit.
The indicated interest sometimes may not be correct. It can exclude additional expenses that might quickly add up to a large sum, making the loan worthless.
You can take out no denial payday loans direct lenders only from Viva Payday Loans to clear off your outstanding loans from other lenders.
3. Loans for Bills
High bills obligation is one of the reasons people take out payday loans. However, before resorting to such loans, one should exploit other channels of covering these utility bills.
One option that you can use is reducing and proper utilization of such essential utilities. Homeowners, for instance, can consider installing a gas plant or solar panels for home-usage.
You can significantly reduce water bills by deploying measures that will help to use water sparingly. These may include setting a limit shower running duration, avoiding free-running taps, switching off lights in rooms not in use, installing thick curtains, reducing heat loss, and minimizing electricity usage.
4. Avoiding Asking Friends and Relatives
It may be perplexing why some people choose payday loans rather than borrowing from family or friends. Besides, it’s a lot safer than taking out a loan from a bank. Nevertheless, some people believe that financing from a lender is preferable. When you acquire money from a lender, the money is owed to a company rather than a person you know. Although lending money from a close relative may not incur interest, it may generate conflict. As a result, some people may choose the risk of the high interests.
5. Loans for a Medical Emergency
One of the most common reasons individuals take out a payday or short-term loan is for medical purposes. A medical emergency will always be a large expenditure if you don’t have healthcare coverage. It might be anywhere from $2,000 to several hundred thousand dollars, depending on the type of treatment you require. If you don’t make the payment immediately, it may accrue interest. However, it would be best to acquire health insurance to avoid getting into a debt cycle.
6. Loans to Pay Overdraft
If you examine your bank account and realize you’ve been overdrawn, it might be worrisome. The bank may impose an overdraft fee, which you should avoid at all costs, especially when considering the potential for conflict of interest. Instead, you can offset your overdraft and ensure you can’t become overdrawn by taking a payday loan to pay your bank overdraft.
7. Payday Loans for Bad Credit
Payday loans have a terrible image in the media; therefore, many individuals strive to avoid them. Alternatively, they will send their applications to banks and other financial organizations whenever they need a loan. Nevertheless, your loan application will certainly be denied if you have poor credit.
On the other hand, payday lenders are willing to provide loans to persons with terrible credit as long as they can repay. So, aiming to improve your credit score is a decent long-term option. You can accomplish this by paying off debts and making payments in good time for at least six months. In simple terms, a better credit score might make it easier for you to get loans in the future.
Because you’re short on cash, it can be easy to fill out a quick online application form for a payday loan to acquire the money you need. However, it may not be the smartest option, and you might find yourself repaying the loan for a long time, interfering with your future investment plans. Therefore, before going to the nearest cash advance business, make sure you check into the best alternative first.