Using Payday Loans to Stay Out of Debt 1
Although it seems contradictory, you can be using payday loans to stay out of debt. It is a bit like taking two steps forward and one back, but eventually it can work. One good thing about the payday loans versus debt is that you must repay the loan quickly. Debts can be dragged out for decades.
It is important to work out your budget plans a month or two in advance, to be sure that you can work in the payday loan repayment without having additional financial problems. Using payday loans to stay out of debt is different than using payday loans for emergency expenses. This plan is a conscious effort to force yourself to knock down your debts in a hurry.
Interest rates for payday loans are higher than most other debt, but as long as you repay the loan in the designated time frame the fees are not significant. Compare this to the month after month accrual of interest charges on credit card debt and you will realize that you can use the payday loan to get rid of the credit card debt fast. Otherwise, the credit card debt creeps along at a few dollars less for years or decades.
Pick out your smallest debt, and hopefully it will fit within your payday loan limit. If it does not, you may have to cycle through this plan a second or third time. Use the payday loan entirely to pay off the smallest credit card debt. Repay your payday loan on time. Then, hit on the next debt and do the same program. Remember to make your minimum payments on all debts while you are working on eliminating them one at a time.
As time goes on, you should be able to get rid of your debt and be out of the payday loans. At that point, stop getting payday loans and begin to put all your extra money into a savings account. This is very important. You need to have your own money store from now on. This way, if you have an emergency expense, you will have a personal stash of cash from which you can withdraw to cover your emergency expense. Rebuild your savings account as soon as you can. Treat the loan from your stash just like a payday loan and repay it quickly. Add interest to yourself if you want to have some fun.