Ten Ways to Avoid Payday Loan Traps

[Apr 16, 2010.]

 

Applying for online payday loans or no fax payday loans can be a short-term fix for financial problems. However, the Consumer Federation of America recommends the following steps to break the cycle of too many payday loans.

Ten Tips to Reduce your Reliance on Payday Loans

1. Build an emergency fund of at least $500. While it may take some time to build an emergency fund, have your bank transfer $25 from each paycheck into a savings account. Make sure you earn as much interest as you can on these funds and don't touch the money unless you have a true emergency. Some banks even match savings or give you a bonus for opening a savings account.
2. Adjust your tax withholding. If you receive a tax refund each year, chances are you are having too much money withheld from each paycheck. Keeping more of your cash should ease your cash flow, but be careful to have enough taken out so you don't end up owing the IRS money.
3. Develop a budget. Write down everything you spend for a month and see if you can find ways to spend less and save more.
4. Speak with your creditors. While fast payday loans can seem like the best solution, ask your landlord if you can delay paying your rent for a few days while you wait for your paycheck.
5. Ask for a paycheck advance. Some employers are willing to pay all or part of an employee's paycheck early, allowing them faster access to their money without the costs associated with a loan.
6. Delay expensive purchases. If your car needs repair, see if you can find alternative transportation while you wait for your paycheck.
7. Work overtime. If you can add a little to each paycheck with a few extra hours of work, it can help your cash flow. Even if you can only work overtime once, it could help your immediate financial needs.
8. Pick up a second job. A second job (such as delivering pizza on weekends) can help you build your emergency savings fast.
9. Sell something. If you need cash, try selling something on eBay or Craigslist to bring in some money.
10. Apply for assistance. If you need money to pay a utility bill, contact the company to see if they can help, or look into local charities that can help you until you get back on your feet.

Even the best payday loans should be used sparingly and only for emergency needs.

 

About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.