Posts Tagged ‘avoid the payday loan snowball effect’

A 3-Step Guide To Avoiding The Payday Loan Snowball Effect

When it comes to avoiding the payday loan snowball effect, there are several things that you need to take into your careful consideration. The first thing that is very important for you to understand that no matter which type of loan you are borrowing, you must know how to use the same responsibly. Just because payday lending programs are advertised as an easy way to get instant cash, it does not mean you should use it even when the need is genuinely not very urgent. For example, borrowing a payday loan to fund your vacation trip is obviously not a great idea. In fact, borrowing a cash advance to ensure timely payment on a high-priority loan like mortgage is also not that great an idea. A better alternative in such cases is to talk to your mortgage lender, discuss your current financial position with them, and request them to allow you to miss a couple of monthly payments before you continue making regular payments. Most lenders will allow you to do this if you agree to pay at least the interest for the months where you are not making the installment payments.

It is because of irresponsible financial behaviors why people get trapped into the viscous cycle of payday loan debts. If you are serious about avoiding the payday loan snowball effect, it is very important for you to understand that payday loans are not meant to be used for regular monthly use. You should go ahead and get a payday cash advance only if you are ready to make a compromise, which is about paying almost double of the original amount of money that you borrow. If you already have a budget plan in action and you are sure that you can make the repayment in time, this compromise might be acceptable to you. Following are the three steps that if you follow thoroughly can help you avoid the payday loan pitfalls.

Budgeting

Budgeting is the first step that you have to follow when it comes to avoiding the payday loan snowball effect. In order to have a better control on your finances and debts, you must have a plan to balance your incomings with your outgoings. Unless you have a budget plan to work on, you will never be able to figure it out whether you really need a payday cash advance and whether you can really afford to make the repayment on such loans in a timely manner. So, the rule of thumb here is that unless you have a plan for repayment, you should never borrow a payday loan.

Never Borrow More Than What You Need

When it comes to avoiding the payday loan snowball effect, the second golden rule is that you should never borrow more than what you actually need. After all, you will have to pay a heavy amount of interest on every single penny that you are borrowing. Therefore, be very careful while you are calculating the amount of money you should borrow. Most lenders will show you a lucrative picture on how you can enjoy better deals by borrowing a higher amount of money even when your needs are smaller. You are strongly recommended never be tempted for such offers. Many people ask the lenders that how much they are eligible to borrow. Do not ask such questions. The question you should ask is how much you actually need. Your decision must be based on what you need, not on what you can qualify for. For example, if you need $300 only but you are eligible to borrow $1000, you should borrow $300 only.

Never Miss The Payment

Timely payment is crucial when it comes to avoiding the payday loan snowball effect. If you have followed the above two steps rigorously, you should not have any problem in making the repayment in a timely manner. Missed payments often result in extension in repayment period, which means you will have to pay much larger amount of interest and finance charges. Just one time missed payment can drag you deeper into a viscous cycle of debt, as the repayment then becomes unmanageable, especially for those who earn hand-to-mouth monthly salary.

Overall, if you follow the above mentioned steps thoroughly and demonstrate a responsible financial bilious, you should not have any problem in avoiding the payday loan snowball effect.


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