3 Ways a Paycheck Advance Can Help You Out of a Bad Situation
Almost everyone runs into money troubles at least once in their lifetime. If you don't have the financial resources (e.g. savings, credit cards) to weather your money problems, one option is to take out a paycheck loan. This is a short-term loan whose due date is based on your pay cycle. Although the money can be expensive to get, here are three ways this type of loan can bail you out of a terrible situation.
Get Cash Quickly
One of the signature features of payday loans is the fact that you can get one fairly quickly. The application process is typically streamlined in such a way that you could visit a loan store or the website of an internet-based lender and get approved for the money within minutes. You'll either receive the cash right then (at the store) or it will be deposited into your bank account the next business day (by online sites).
This can be very helpful in situations where you need money immediately. For instance, if your car breaks down and you need it to get to work, a payday loan can help you quickly get the cash to make the necessary repairs so you don't miss any (or very few) days of employment. Emergency medical care, credit card payments, and sudden vet bills are other unforeseen expenses you can cover using payday loans.
Avoid Overdraft and Late Fees
One common complaint people have about payday loans is the fees lenders charge for the money. Depending on the company, you'll be charged anywhere from $15 to $30 in fees for every $100 you borrow. For instance, if you take out a $300 loan, you'll have to repay $345 to $390 when the loan comes due. While that may seem expensive, it's important to weigh the payday loan fee against other charges you may face if you don't have the money to cover your unexpected expenses.
For example, banks charge up to $39 or more for each item they pay out of your overdraft fund. It may not make sense to take out a payday loan if you only need to cover one item that may overdraw your account. However, if you have even two items hit your checking account when you have insufficient funds, taking out a payday loan to cover them and avoid those fees quickly becomes the cheaper option. This can also apply to late fees charged by credit card companies, utility services, and other monthly bills.
Additionally, banks will close your accounts if you overdraw your account too many times, are constantly late paying your bills, or continuously exceed your credit limit. Therefore, taking out a payday loan can help minimize the financial fallout associated with being late or overdrawn as well as save your account from being closed.
A third way paycheck loans can help you out of a tough situation is they can prevent you from hurting your credit and, in some cases, assist you with rebuilding your credit.
First, if you have a payment due on an account that reports to the credit bureaus but you don't have the money to pay, getting a paycheck loan can help ensure you meet the financial obligation so you don't suffer a negative mark on your credit profile. Your payment history accounts for 35 percent of your credit score, so even one late payment can cause your score to drop quite a bit (up to 110 points).
Second, some payday loan lenders have special programs designed to help people improve their credit scores. After you take out a certain number of loans and repay them on time, the company will approve you for a regular loan that you pay back like normal. If you have bad credit, this type of loan can raise your score, which may let you get approved for other loans you can use to consolidate your debt and improve your financial situation.
For more information on how payday loans can help you or to get a much-needed cash infusion, contact a local paycheck advance lender like Cash Depot Inc.