Tips for Using a Payday Loan

Why you should not borrow from your friends or family
December 22, 2016
5 money rules to live by
December 23, 2016

Tips for Using a Payday Loan

Payday loans offer a great solution to your short-term financial requirements. If you are a salaried professional, you can take up this loan in the middle of a month and repay the amount after your salary comes. The interest rate for this type of loan is a little high, but the convenience of borrowing from a licensed moneylender is worth the extra cost. However, there are many things to consider before and after taking a payday loan. Before you apply for this loan, consider choosing the right lender to avoid paying higher interest rates. After you get the loan, you should use it in the right way. Many people fail to utilize the loan amount to their best advantage. So here are some tips on how to use a payday loan.

Borrow only if necessary

Taking up a payday loan for buying a new motorcycle, when you already have one, is not a good idea. You should not take this loan to fulfill your desires. Borrow only if it is necessary. For instance, if you face a medical emergency but do not have funds to tackle the out-of-pocket expenses, consider taking a payday loan. You can also borrow for your kids’ education, car, or air condition repairs. Make sure you have a valid reason for taking up this loan.

Consider how much you should borrow

Just because you can borrow up to 50 percent of your salary does not mean you should take up the entire amount. Keep the loan amount less than 30 percent of your monthly income, if possible. Anything more than that may land you in a serious problem, if you fail to repay on time.

Keep the unused amount aside for loan repayment

Let’s say your salary is $1000. You took a payday loan of $300 for a medical emergency, but used only $200 for that purpose. You should keep the rest $100 aside for loan repayment rather than spending it on unnecessary things.

Choose the right lender

It is important to take the loan from an acclaimed money lending company that has years of experience in this business. Visit the website of the lender and read reviews and testimonials. Check whether the company has a good reputation. Ideally, you should borrow only from a licensed moneylender in Singapore. You can check whether the lender is licensed by the Registry of Moneylender of Singapore.

Read the terms

Before you sign the contract paper, you should read the terms and conditions carefully. Some contracts may have hidden clauses. Check everything to avoid any unpleasant surprises in future.

Consider your purpose

Even though payday loans are meant for emergencies, you have no restriction on how to use the loan amount. While you should use it to meet your short-term monetary requirements, there is no harm in using it for larger needs. For instance, if you need some amount immediately to make a down payment for taking a house-building loan, you use payday loan for the purpose. Similarly, you can consider taking a payday loan for opening a store, starting an online business, etc.