If your funds are running low and you don’t have credit available, you might be considering a payday loan as these loans have only minimal requirements, with no need for a good credit score.
While it’s important to understand that applying for and receiving payday loans online or at a store location means paying a high-interest rate, sometimes you just have to have that cash right away, and it’s good to know that you still have an option.
Forbes reported in 2019 that as many as 12 million Americans are taking out payday loans every year, with borrowers typically earning around $30,000 annually. Most have difficulty meeting basic living expenses such as rent and utility bills. If you’re one of them, it’s understandable that you might have to resort to taking out a payday loan.
Payday loans can be used for anything – there are no stipulations that require the money to be spent on a particular need, but these are the primary ways most use them.
Paying Bills
One of the most common reasons people turn to payday loans is to pay outstanding bills they can’t afford. For example, say you had a hefty power bill after a brutal winter – if you can’t pay it, it could mean having no power at all. But a payday loan can help you avoid that with the money typically getting deposited into your account the same day.
Loans to Pay Overdraft Fees
Not everyone is good at balancing their checkbook. While they might think they know how much money they have in their checking account, when money is tight, the smallest error can end up causing overdraft fees, even when short by just a penny. While the bank may forgive one mistake, if it happens more often, it’s unlikely. One overdraft fee can cause a domino effect, leading to an even bigger financial headache, making a payday loan necessary to clean the slate.
Medical Emergencies
A medical emergency can easily turn into a financial disaster due to the high cost of care. If your health depends on it, a payday loan may be the only option. Despite the high-interest rate, your life is obviously worth more.
Debt Consolidation
Some people use payday loans to consolidate debt into one payment. If you have credit cards with high interest rates and cannot make the minimum, it might make sense to avoid the late payment fees and hit your credit score.
Holiday Purchases
Holidays are fun to celebrate, but they often come with pressure to make big purchases for family members and friends. If your budget is running tight during these occasions, a payday loan can allow you to buy those gifts while relieving that stress and tension. It can be a great way to tide you over while waiting for an end-of-the-year bonus, or a tax refund, for example.
To Avoid Embarrassment
When you can’t afford to pay rent or make another promised payment but don’t want to ask family or friends for a loan, payday loans can be a good way to avoid embarrassment. You’ll be able to pay off that expense privately, without letting anyone close to you know that you’re having financial struggles.