Payday loans should be regarded as an emergency resource to be used only as a last resort. This is because this modality of credit is usually expensive, especially in the financial ones. While the average interest charged on Payday loans made at banks is between 5% and 6% per month, on financials, the rate may be around 20%.
To get a comparison idea, taking a loan of R $ 10 thousand at a 20% interest per month, you will pay R $ 1500 more in interest per month than if you had contracted a 5% line.
Before you make that decision, which will compromise your budget in the coming months, it is critical to answer some basic questions:
1. Do you really need this money?
Taking a Payday loan is no joke. The operation should not be contracted on impulse. Think about your real need for this money.
2. Can you wait a little while and save the amount you need?
If you decide that you really need the money, evaluate your urgency now. Is it possible to wait a little while until you can add the total or even partial amount so that you can make a Payday loan for a smaller amount?
3. Can you borrow from someone close to you?
Lending money from friends and family, for example, agreed interest rates tend to be much smaller (sometimes symbolic) when compared to interest rates in the market.
4. Will the final installments fit your budget without breaking it?
This is one of the key practical factors to consider when taking out a Payday loan. It’s no use taking on a commitment that will end up destabilizing your budget and creating a snowball of debt. Take the opportunity to see if the distribution of your spending is in line with the 50-15-35 rule.
5. What is the amount of interest charged? Are they the best option you get in the market?
Another superimportant factor to be evaluated when seeking a Payday loan is the interest charged. Compare here the interest rates charged by the main financial institutions of the country.
6. Will I borrow at the bank or the financial?
You already know that, in general, the interest of the Payday loans in the financials is usually higher than in the banks. However, they offer some advantages, such as the possibility of lending money to people with the dirty name, something that does not happen in banks. These should be the two main factors to be weighed in your decision.