Retiring early requires managing your finances carefully when you’re younger. Emergencies can throw a wrench in the best plans, leaving you searching for a way to address the issue. Payday loans are one way of handling those unexpected problems. While the loans can be a good choice occasionally, using them on a regular basis can derail your plans for a wealthy retirement.
In Case of Emergency
You will avoid long-term financial problems by using payday loans only in emergencies. When you are facing eviction if you don’t pay the rent immediately, then a payday loan can save you several hundred dollars. However, using a payday loan to buy a tablet or purse is not a wise choice. The loans should only be used when absolutely necessary and when they will actually save you money.
Weighing the Dollars and Cents
Retiring early is all about making smart financial decisions and saving money along the way. Payday loans carry high interest rates, but there are times when they can actually save you money. Lenders clearly list their fees, allowing you to compare the loan expenses against the potential costs of not taking the loan. If getting the cash fast will save you money, then a payday loan can be the right choice. Examples include stopping a repossession, avoiding eviction, covering legal fines or preventing overdraft fees on your checking account.
When Speed Matters
One of the advantages of a payday loan is that you can get the funds in less than an hour. Even if you have the credit score to get a traditional loan, a payday loan will still deliver the money to your account faster. This is important if you’re dealing with a time-sensitive issue such as an overdrawn bank account. If getting the money fast is the utmost concern, then a payday loan is often the best choice.
Take Advantage of Competition
Payday loans carry higher interest charges and fees. However, that doesn’t mean you have to pay the highest rates in town. If you are going to utilize the services of a short-term lender, then you should take the time to check fees with a few different companies. It only takes a few minutes to examine the information online, and it could reward you with a lower rate.
Conservative Borrowing Pays
The convenience of payday loans makes them a tempting choice. Padding the loan amount is incredibly easy, but it’s a dangerous financial decision. Borrowing more money will increase your interest costs, and the loan will be more difficult to repay when it’s due. If you decide to take a payday loan, make sure you only borrow what you absolutely must. You will save money with lower fees and help safeguard your retirement plans.
Be Prepared for Payday
The loans are usually repaid in full when you receive your next paycheck. In addition to the principal, you will also repay the interest charges and other fees. You must have a plan for making this bulk payment out of your next check. It might leave you short on funds for your other expenses. Do not take a loan at all if you will not have the money to repay it.
Payday loans aren’t always the best financial choice, but they can serve their purposes. However, you don’t want to send your finances into a downward spiral by using them on a regular basis. Before applying for a payday loan, make sure that it’s the best option available to you. Borrow only what you actually need, and shop around for the best rates. Using payday loans properly won’t jeopardize your retirement plans, but turning them into a way of life could derail your retirement goals.
Guest author Sharon Koontz is a financial guru and freelance blogger writing on behalf of nowaitloans.co.uk.