Great power comes with great responsibility. Think of a payday loan as your power that can go bad as soon as possible if you don’t use it wisely. Because it is a debt, after all, one should use a payday loan for something good. Wasting it on luxurious stuff that won’t give you any return at the end is just bad financing. Below is some of the top example of bad use of payday loan.
Consolidating other debts
One of the most popular uses for personal loans is consolidating or refinancing debt. But paying an old loan with another loan is just bad financing. A personal loan used to consolidate debt can result in simpler money management and a lower interest rate, which will save you money on interest payments. However, not everyone will save by consolidating credit cards with a personal loan. Or the savings might be so small that the payoff simply isn’t worth the hassle. For instance, you might be counting on that low rate the lender advertises. But the rates you qualify for could be significantly higher than the marketed APRs (notice lenders say you can get rates “as low as” these). Consolidating debt with a personal loan also can add origination fees and other costs to your balance.
Gambling and voices
It’s just bad news when a person uses the loan for gambling or vices such as alcohol. This just means that that person has a deep problem. Do not borrow money to ‘have a flutter’ on the horses or for any other kind of gambling. You are already risking your own money when you place that bet, so do not make it worse by losing money that you have borrowed, only to be faced with repaying the debt plus interest for perhaps the next 12 months or even longer. Loans can be very useful and sometimes absolutely necessary, but they should not be used for things that you don’t really need.
You want to splurge for a vacation
Vacations are fun and can be very life changing. If you want to splurge for something expensive, borrowing money could leave you in a world of hurt. A vacation to Hawaii may sound like something you won’t regret borrowing for. However, paying off that trip for the next several years would surely change your tune three or four years afterward. There’s nothing wrong with splurging, but you should try to save up the money to pay in cash if you want to treat yourself. Trust us; buying something you truly want is a lot more fun when you pay with money you already have.
Small, inexpensive purchases
Using payday loans for everyday conundrums can be known as bad financing. You can simply buy all these things with your own money that you are already earning. You would not, for example, take out a loan to buy a book costing £6.99, a tin of paint at £9.99 or a new shirt for £19.99 as it is just not practical to do so and you can probably wait to buy these items when you have saved enough money to do so. They are not priority purchases. When you are shopping in your local supermarket, you should be able to ignore the temptation to spend £17.99 on that T-shirt you have had your eye on for some time, especially bearing in mind that you already have six other shirts at home to choose from. It’s much more sensible to either just not buy it or at least wait until you have the money if you must.