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Should You Finance the Festivities with Payday Loans?

Should You Finance the Festivities with Payday Loans? 41

Last year, about one-in-three merrymakers took on debt to celebrate the holidays. And about 18 percent of these borrowers did so using payday loans.

A payday loan is a convenient online option if you need money fast when you don’t have great credit. But is it the best option for holiday expenses when you find yourself short over the season?

What Are Payday Loans?

Payday loans (also known as payday cash advances) are small dollar, short term loans.

They usually advance you between $200 and $1,000, depending on the lender. At this size, they’re ideal for something small and unexpected, like repairing a tire after you damaged it on the highway.

What you pay is the principal (which is the amount you borrowed) plus fees and interest. Since payday cash advances are last-chance, bad credit loans, these fees are expensive. Most equal to a three-digit APR, and some even top out at 600%.

Like any borrowing option, cash advances only make sense if you can afford such high APRs.

Some people can. If so, they can be a helpful tool in an unexpected emergency when no other financial institution is willing to play ball.

Payday Cash Advances Have Short Terms

The only problem is payday cash advances are usually due back in one lump sum by your next payday.

A lot of people can’t juggle high APRs with such a short turnaround. For most people who get paid bi-weekly, that’s only roughly 14 days to come up with the cash.

If you can’t pay everything back by the due date, you could face overdue fines and extra interest, meaning you’ll owe even more later.

Emergency Alternatives Exist

Sometimes, you can’t avoid borrowing with bad credit, so paying high fees are an expected reality of any loan. But there is MoneyKey.com for bad credit that don’t have such fast turnarounds.

If you can’t handle paying a large sum of money within two weeks, look into installment loans for bad credit. They may apply similar fees due to your credit rating, but they give you more time to repay what you owe.

As online loans with monthly payments, installment loans break up your amount owing into several smaller payments. These payments tend to be fixed, which means they remain the same every time. This might give your finances a little more breathing room.

Do the Holidays Count as an Emergency?

There’s a lot of pressure on the holidays. Kids might expect mountains of presents under the tree, and adults might take for granted you’re willing to travel across the country to celebrate.

Guilt over not being able to meet these expectations may convince you to borrow a cash advance.

But if you’re already struggling to afford the holidays, adding a payday loan won’t make anything better. It will only be postponed when you face your financial problems, and when you do, you’ll have to pay those fees.

Instead, focus on festive activities to fill the holidays, and wrap up handmade or second-hand gifts. You can even try borrowing from a friend or family to make sure your kids have at least one present to open. And as for travel, ask your loved ones for a rain check when you’re in a better position to afford flights or rentals.

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