Getting payday loans is straight-forward enough - it's the easy part, isn't it? You get the money, you spend it, and everything is just dandy for a while. But the problem with getting loans is that you also need to pay them back. That's the part that may create a set of problems for some borrowers. Here are some tips on repaying payday loans.
What Are Payday Loans?
Payday loans are unsecured loans you get for a short amount of time. Traditionally, a payday loan is granted until "payday", so for approximatively one month. For this reason, the amounts available to borrow are small, and because they are unsecured, the interest rate is high.
Here's How You Pay Off Payday Loans
So, you've got a payday loan, but now that you need to pay it back, you're not entirely sure how to go about it? Here are some of the things to keep in mind when repaying payday loans:
Don't forget the interest charge
Don't allow yourself to be seduced by the promise of a payday loan if you can't pay it - remember that it's not just the amount you borrow that you will have to return, but also the interest.
And even if you are completely aware of the cost of the interest, there are other costs that you may have overlooked. Those all add up and can push the final amount into something you are uncomfortable paying.
Work on your budgeting skills
It's a no-brainer: if you're worried about being able to afford to repay your short-term loans, you need to start budgeting. Here are some things you can do to put some money aside:
- Impulse-purchases are a problem for everyone, but if you want to curb that habit, consider doing this: every time you want to purchase something you don't need, put that money in your savings account for your loan repayment, instead.
- Don't hurry to pay off other expenses or bills that are not urgent if you still need to make the loan repayment.
- Make a minimum budget for everyday expenses and stick to it until you've managed to repay your payday loan.
- Save money every week to be put towards repaying your payday loan, even if it's just a small amount.
Don't bite more than you can chew
Finally, the simplest way to avoid a situation where you cannot afford to repay your loan is to simply not borrow more than you can actually afford to repay. Here are some things to do to ensure you only borrow as much as you need and can pay.
- Determine how much you earn
How much do you actually earn in a month? Include your monthly wages, or any other form of income you may have, such as passive income from letting a house, etc. This is the money you are working with and you need to be able to pay off monthly expenses as well as a loan instalment.
- Think about how much you spend
Now sit down and add all of your expenses together. How much money do you need to survive? Make a minimum budget and see if that leaves any money. This is what you can afford to repay every month towards a loan.
- Use an affordability calculator
You may find that it's very helpful to use a loan calculator. That will show you exactly how much the loan will cost you in total, how much you need to repay per month, how much you are repaying in interest charges, etc.
- Figure out how much you need
Of course, your needs are also of primary importance - figure out what is the minimum amount you can use to get by and borrow it, but don't go over. Affordability games are dangerous.
All in all, a payday loan can be a good financing solution, as long as you can afford to repay it. Use these tips to ensure you can successfully and responsibly pay off debt.