Pay Day Loans – A Lifeline (sometimes)

debtWell my checkbook register is looking very scary right now. Due to a “return item unpaid” from my November payment to T-Mobile, my account was shaken a bit. Then due to an unauthorized draft of $30 (by some mystery company),  a pro-rated car insurance payment that was $22 dollars higher than usual (that’s my fault…I forgot about that) and an older check (I wrote it in October…only cleared 2 days ago). Couple all of this with the fact that my travel expense check is being held up in processing…and I have no money. In fact, I’m below the “flat broke” mark…since my rent check for $500 hasn’t cleared yet, and I am about $74 dollars short of covering it.

And I spend $50 a week in gas alone…

So as much as I hate it…I had to take out more Everyday Loans. This is my fourth one. However as much as I hate paying their fees, I don’t know where I would be without them. The absolute best is to borrow money from family and friends…to cover you until your next payday. But when you family is poor like mine are, it’s not really an option. Yes it’s a shame that I don’t have even a couple of hundred dollars lying around in savings…for moments like these. And trust me, these payday loan fees are my punishment.

But I’m on a mission to embrace a plan. On my next paycheck, I’m going to go ahead and pay off my highest payday loan of $260. That will leave two $100 loans and a $150 loan (I was tempted to borrow $200 this morning, but I’m just going to hold out and wait for my expense check). Thankfully my boyfriend gets paid today, so I can get $10 in gas money from him for tomorrow at least.

I’ve been getting payday loans for years. And while I don’t recommend them, I have these suggestions to others who are looking into them:

1. Try not to take out more than you absolutely need. Payday loan companies love to push big dollar amounts under your noses. It may be tempting, but be smart! The renewal fees get higher as the loan amounts get higher. And obviously, it is easier to pay off a smaller loan in full than a larger one. Pay off the loan, and no renewal fees! Otherwise, the banks would send bailiffs like Moorcroft Debt Collectors to get back the money from you, which simply isn’t worth risking.

2. Shop around. The fees for payday loans are not standardized. If possible, comparison shop for the best rates and terms.

3. Anticipate (if possible) the need. Since payday loans are a last resort, they are often taken out when it’s too late. For example, if you see the due dates for your bills looming, but you know you are short on cash…go ahead, get the payday loan first, and pay those bills. You will avoid late charges and NSF fees in your bank account this way.

4. Split your loan between two different lenders. Although I would not suggest 4 (like in my current situation), if you need $300, it may be better to borrow $100 from one lender and $200 from another….if you know that you won’t be able to pay back the full amount in your next paycheck. If you do this, you can at least pay off the one loan, and then pay a reduced renewal fee on the one that you do have revolving (‘reduced’ in that it will be less than it would have been if you took the entire amount out with one lender, and paid two renewal fees).

5. Supplement your loan with money from family or friends. For example in my case, I could have borrowed $300; not just to cover my outstanding check, but for gas and other expenses over the next week and a half. But I decided that it will be better to borrow that money from friends and family (with no interest of course), and then only borrow $100 via a payday loan. So try to get whatever money you can on your own first. And then go ahead for a payday loan (if you still come up short).

I am not a money expert, and I don’t always make the best decisions. But I’m putting my story out there so that others don’t feel alone and confused. I hope that it works! 🙂

(Note; I live in PA…a state that has banned payday loan services. So my entire point of reference is the online payday loan industry…and not local lenders)