Avoiding the Payday Loan Mentality

Payday loan mentality is a kind of thinking that will get you into a lot of trouble. This is a type of thinking that says, “I don’t have money right now but that’s ok because my paycheck is coming”. Because we are always thinking that money is coming, we are not afraid in spending money right now. That even goes further since we don’t just buy things with our money, we even buy things even if we don’t have money.

Since we know we will have the money in our next paycheck, the easiest way in getting money is just to go to a payday loan company. All you need is to fill out some information, answer some questions and get the cash you want in an hour or two.

This type of mentality is pretty simple and even practical since you know that money really is coming. But that mentality is really dangerous. You don’t think that far ahead and you’re not exhausting all the possibilities. The interest rate in payday loan companies is very high. The annual interest rate on an average is at 300% - way higher than credit card and other types of loan.

Some will say that it’s tolerable since you can get the money  and paying them back is easy since you’re paycheck will be arriving. Thinking that your paycheck will be arriving on time is a very dangerous presumption especially when you are in a payday loan. Even though your company hasn’t missed sending you a paycheck on time doesn’t mean they will send it on time the next payday. One thing may lead to another and you may end up missing a payment.

Missing one payment in a payday loan is very dangerous because in some states, payday loan companies can file criminal charges if you are not able to pay them on time. Remember that you have signed a check that will be cashed on the day you are supposed to pay your debt. In some states, you are lucky if you are able to arrange the payments without being sued.

The problem with “payday loan mentality” is the lack of forward thinking especially in the aspects of finances. Unless you’re a millionaire, money is never a constant thing. You’ll always have to work hard and anticipate that money might never come. You always have to think of the worst case scenario to ensure that you have the funds to support you in case something happens.

Combating the “payday loan mentality” requires conviction and…a list. Sit down and think of the things you want to buy and you have to pay for. List all of these things and assign a budget for them. Also list your sources of money which is your bi-monthly, monthly or even your weekly salary.

By listing all the things that you want, need and earn, you’ll know if you still have money before the next paycheck arrives. Make it a point to save some money every paycheck. It really doesn’t matter how much you will be saving every paycheck as long as you keep something in your savings account. When the time of need comes you’ll be able to use that amount. The psychological effect of having something to spend in time of need is very rehabilitating. If ever you end up in a payday loan problem, you’ll have something to pay for.

Avoid the “payday loan mentality”. Having no savings while trusting your paycheck is a very dangerous as it could lead to payday loan. The small amount of money that you save every paycheck will get you place and eventually, avoid applying for a payday loan.