It is not uncommon for us to sometimes see ourselves in a financial predicament, deciding on how we were going to pay for an unexpected bill or an unusually large purchase. We may often be overwhelmed with the options available and more commonly, most of us lean towards using credit or taking up an online loan. Also, with rising costs of living and job uncertainty due to the current global pandemic, there has been an exponential increase in the number of young adults taking up payday loans. As such, it is important to understand the complexities surrounding the different types of loan options and in this article, we shall discuss the options available and also focus on why online fast payday loans may not always be the best option available. In fact, it may further exacerbate the existing financial issues.
Firstly let us look at what exactly is an online fast payday loan. Pretty self explanatory in its name, it is one where we borrow money from a financial institution and provide assurance that we will return the base sum and interests, by the next date that we receive our salary. These are short term fast cash loans that do not require collateral and are given after evaluating the borrowers creditworthiness. Sounds familiar? The technicalities of this loan is very much similar to that of credit cards. Only difference is that a credit card does not charge you fees till the due date, whereas for an online fast payday loan, you are charged immediately after acquiring the funds. However, both ways we are spending borrowed money.
It is important to understand the impact of interest rates and what we should look out for in order to properly manage our debts and loans. With online fast payday loans, it is important to take note that the ease in applying for such a loan comes with a price in terms of the interest rate fees one would pay for. It is known to have one of the highest interest rate charges amongst most other types of loans. And for most loans, once a payment is defaulted, the late fees and charges will usually be charged on top and above of the initial loan amount, exponentially increasing our debts and payments. As such, we should properly evaluate our financial situation before applying for a payday loan, as if we are not able to provide the lenders back with the full payment, we are looking at a debt that would be growing at an increasing rate. This can lead us on a downward spiral and path towards financial ruins.
Careful consideration of all the available options (eg personal loans, balance transfer) before choosing the type of loan is highly recommended. It is important to consider all loan options as we may come across some alternatives that may provide us with a better payment plan and lower our monthly financial obligation. One such example would be, personal loans. Personal loans are basically unsecured credit loans that, like payday loans, do not require collateral and are based on one’s creditworthiness. However, a personal online loan provides us with a repayment option of up to 5 years. This gives us the ability to properly calculate our financial obligations and then apply for a tenure period where the monthly payment to the online loan is kept low and manageable. That way, we reduce the risks towards defaulting on our payments and also, improve our overall creditworthiness by paying what we owe on time. Personal loans can be applied through a bank or even through licensed money lenders. It is advisable to properly discuss the payment schedule with the loan officer in order to ensure that we are able to abide by the repayment schedule.
It may not be easy to meet payment schedules and timelines, especially in an expensive city. However, with proper understanding and application of the right financial tools, we can minimise the total amount of interest fees and charges incurred due to our debt obligations on a monthly basis. We should never be complacent on our financial standings as the future will always be uncertain, and we have seen change in our economic climate. Whenever placed in a financially stressed situation, we should always seek the right kind of professional advice and thoughtfully weigh all the options available in order to smoothly achieve financial freedom.