How To Use Payday Loans

Payday loans are never a good solution to long-term financial problems but for many, they are a necessary evil. Sometimes payday loans are the only solution readily available to address an unexpected expense.  Payday loans carry interest rates as high as 400% in some states, borrowers are often trapped paying two to three times the principal amount in interest payments alone.  It’s easy to see how payday loans can lead to an endless cycle of borrowing.  However, there are ways to utilize payday loans to your advantage to limit the total amount of interest that you will pay. Here are a few tips that will show you how to use payday loans.

Best Way To Use Payday Loans

It pays to know how payday loans work and understand the laws and know your rights as a consumer when it comes to payday loans.

Apply For An Extended Payment Plan

Although it’s not advertised, payday lenders that are members of the Community Financial Service Association of America offer consumers an EPP (Extended Payment Plan) at no additional cost. The Extended Payment Plan affords borrowers the option to break up the balance owed on a payday loan into four equal payments with no additional fees. The equal payments are divided up over four paydays. Let’s say for example you owe $500 in fees and principal. An EPP would cap the fees and principal at $500 dollars which you could pay back over four equal payments at $125 per payday.  If the same $500 balance were to be refinanced over the same duration without an EPP, it would require paying roughly $150 in interest payments alone every payday with none of these payments being applied to the principal owed. However, be advised, some lenders only offer borrowers one EPP per year.  

Float Multiple Payday Loans

Another alternative is floating payday loans. This is a short-term solution that requires a great degree of discipline. This may vary from state to state depending on the number of days that your state permits consumers to cancel a contract. For instance, if your state permits you to cancel a contract up to three days after signing; you can take out a payday loan and repay it within three days with no interest or fees.  You simply repay the original loan amount. For example, if you are paid on Friday every week, you can take out a short-term interest free payday loan on Tuesday and get until Friday (payday) to cancel the loan by simply repaying the original loan amount. This provides a short-term interest free loan to bridge the gap between Tuesday and Friday. You can borrow money and pay no interest fir. 3 days.

If additional time is required the same method can be utilized using several lenders. If you take out a loan with lender A using the three-day rule above, you can simply cancel the loan within the three-day period using a loan from lender B. After three days you can simply return to lender A to get the funds to cancel the loan from lender B.  This method can be utilized providing neither lender A nor lender B cuts you off due to an excessive number of loan cancellations. Some payday lenders do not like frequent loan cancellations because they are unable to make money off of you in the form of interest.

Most payday loans are funded the next business day online or the same day in person. It’s not unusual for lenders to push out funding dates to disrupt this practice. Please note this method should only be used as a short-term measure. Also, this will require a lot of running around unless you opt to utilize online lenders to save time, energy, and fuel. Payday lenders make astronomical profits by way of interest and fees.  Careful use of the practices above can help borrowers level the playing field and hold on to more of their hard earned cash. Paying less interest is a great way to multiply my money.