One of the criticisms often heard about pay day loans is that they trap borrowers in an endless cycle of debt. Pay day loans are supposed to be for emergencies but sometimes they are used by those needing to pay off other debts. When a high interest loan isn’t paid off in time this can cause the debt to multiply out of control. But, this needn’t be the case. Here are some tips to break the pay day loan cycle.
1. When using pay day loans borrow as little as you need for as short a time as possible
Some pay day loan providers will make you borrow money for a certain period of time and will not loan smaller sums of money. Some pay day lenders like http://www.wonga.co.za will let you borrow as little as R100 for a time period as short as 1 day. Clearly the more you borrow for longer the more you will pay in interest.
2. Review the debt situation
Take time to review your debts. Write them down and prioritise the debt with the highest rate of interest first. This will reduce the amount of interest you pay overall.
3. Take advantage of your consumer power
Make sure you are getting the best deal from your electricity and phone providers. Review the charges and interest rates offered by your bank and/or credit card. If you can, switch to more preferable providers.
4. Put a self-ban on non-essential expenses
This seems obvious but make sure you review what you spend your money on and whether you really need to buy it. Find ways to cut back on what you are spending.
5. Talk to the people you owe money to
If you are borrowing to pay off other debts you are likely to find that many organisations who you owe money to will put in place some form of repayment scheme so you can pay in manageable instalments. You just need to contact them to explain your position and make an agreement as to how and when you will make repayments. You may then find you do not need a pay day loan or only need a much smaller one.
6. Don’t be afraid to ask for help
Community organisations, friends and family may be able to assist. If they cannot assist you financially they may be able to give you guidance, help you create a budget and offer support in other ways such as inviting you around for a meal or giving things you need to you so you don’t have to go and buy them.
It is obviously impossible to save when you are scraping together enough money to pay off debts. However, when the time comes and you have some spare cash don’t just spend it. Save it. Keep an emergency fund available to you. That way you hopefully will not need to borrow money in an emergency situation again. This may take time and discipline but will be worth the effort in the end.