Using A Payday Advance Loan Wisely: A Case Study
July 10, 2010
You came up short on the rent this month and have been seeing those tv ads about payday loans. Sounds easy enough, right? Well if you’re thinking about taking out a payday advance loan here’s a real life case study that may help you avoid the common pitfalls of using this type of loan.
This is the story of John. He used a payday advance loan to catch up on some over due bills before his next paycheck.
John had about four bills he needed to catch up on. His credit card, automobile payment, cell phone bill, and rent were all due in three days absolutely about $2000. He didnt get paid until a week from then. John had $1000 in the bank.A bank loans was out of the question. John needed the money in three days, and a bank loan would take at least that long just to complete the paperwork.
If John was late paying his credit card bill, that came with a $35 late fee which would put his balance over the credit limit on his credit card. It would also tack on an extra $50 over-the-limit fee. John couldn’t afford to be late on the automobile loan or the rent. He couldnt risk the late fees that came with those bills.
Cash Advance Payday Loan To The Rescue?
John decided to apply for a cash advance payday loan. He knew it would be foolish simply to trust a lender of these loans for information. He searched on the internet and found a website that did not belong to a payday advance loan lender, but instead reviewed the payday loan lenders.
He visited the website of one of the web payday advance loan lender that was rated particularly well. Again John knows there are a lot of shady businesses online, so he was careful. Here’s what he looked for:
• The loan company’s website had a link to the Superior Business Agency. Clicking on the link, John saw the company’s record: member in good standing with no unresolved complaints.
• The loan company’s application clearly said what the fees were, and what the annual percentage rate (APR) was. It also said what penalties he would have to pay if he did not pay back the loan on time.
• John saw that the loan company’s loan terms, fees, and interest rates were competitive after looking at other sites.
So once he found what he was looking for he double-checked that his upcoming paycheck would be enough to cover all outstanding bills. He then checked into all the bills he would have to pay in between his upcoming paycheck and the one after that. After all, the next paycheck was going towards repaying the payday advance loan. He would need to make sure there was enough money left over to pay any remaining bills. He didn’t want to have to take out another loan after that.
John figured out that their would be $300 left over after he paid all the bills between now and the next month’s paycheck. Living for 30 days on only $300 would be a challenge. But he decided it could be done if he cut back on some things. He could bring a lunch to work rather than buy it in the cafeteria, and give up going out at night.
He posted notes on her refrigerator, steering wheel, and his wallet, reminding himself not to make too many trips, waste food, or splurge on anything that wasn’t a necessity.
Did John’s Payday Advance Loan Plan Succeed?
John took a $1000 cash advance from the Loan Company and repaid it on the 15th along with a $50 fee. He saved $85 in credit card penalty fees. He also stayed on the good side of the landlord, automobile loan lender, bank, and cell phone provider.
The experience also showed John that he was living too close to the limits of his paycheck. He realized that he would be superior off moving out of his current apartment and maybe getting a roommate. He could also save money on gas by moving closer to work.
John is grateful to the payday lender for saving him from financial disaster. He was proud at how he managed to stay out of the debt trap so many other payday cash advance borrowers get you into. He tells all his friends that if they ever get a payday loan to do their homework, just like he did.
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