“A simple fact that is hard to learn is that the time to save money is when you have some.” ~Joe Moore
You often hear people are living paycheck to paycheck and don’t have enough money to save. As this may have some validity, it’s not necessarily true. Many consumers are seeking temporary relief from payday loans to help with monthly expenses.
The terms of payday loans are provisional and many find it difficult to repay the loan. “Payday loans are advertised as short-term credit lines, typically extended for two weeks to help consumers get through to their next paycheck.”
The disadvantage of the short-term loan is the ability to repay once its due. Nearly half of Americans who get quick loans have had to either beg or borrow from someone to pay it off. The problem is the short-term loans are temporary and it doesn’t fix the initial problem of not able to make ends meet.
As much as borrowers complain about not having the ability the save for an emergency, the payday loans are adding to their list of complaints. The loans have been noted to have an interest rate as high as 368%.
According to a Pew Charitable Trusts report, “Nearly 12 million borrowers take out payday loans averaging $375 each. Yet, only 14% can afford to repay the $430 in principal and fees owed after two weeks. Many borrowers find the $55 fee needed to renew the loan for another two weeks to be much more affordable. The average borrower has a five-month cycle of debt where they end up owing a total of $520 in fees.”
If calculated, that’s $520 that a borrower could have saved by managing their money properly and contributing toward a saving account. For consumers, who believe they can’t afford to save, they actually can’t afford not to save.
The decision to apply for a short-term loan isn’t conducive to an affordable lifestyle. Although loans are advertised as short-term, borrowers are using the line of credit to pay for essential expenses.
Instead of using the loans as a way to fill in the gaps, try cutting expenses. If you’re able to cut out your short-term loans that’s $104 per month you’re able to save.
Your pocketbook will see relief, you won’t feel stressed, and you begin to change your spending habits.