A payday loan can be an excellent source of cash for sudden and/or serious financial strain. Yet, it must be approached in the right manner. From valid reasons to a sound financial plan, here are some important considerations before taking out a payday loan.

#1: Your Financial Health

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How are you doing financially? While candidates for payday loans aren’t necessarily doing too well, at the same time, taking a step back can help you determine where you stand. It can also help you understand whether you’ll be able to repay the loan.

Take a look at your overall budget, noting how you will repay the loan.  A payday loan is a serious tool for households. You must make sure that you will have the necessary resources to pay it back quickly in order to regain your composure financially. After all, this is an important budgeting tool that can only work as part of a sound financial plan.

#2: The Reason for a Loan

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Some expenses simply don’t justify taking out a payday loan. According to loan experts, gambling, vacations, gifts, debt considerations, entertainment expenses, and more can be placed in this category. In other words, a payday loan should only be used for the essentials, as found in your budget; otherwise, you could be getting yourself into bigger trouble.

#3: Cutting Back on Everyday Expenses

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If you are considering a payday loan for everyday expenses, a red flag should appear. While ideally a payday loan should not be necessary, some emergencies can justify such a loan. However, your budget should take care of items at the grocery and other necessities. Take some time to evaluate your budget, and then cut down on these expenses to save some money.

#4: The Right Payday Loan

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Once you make the decision to proceed towards a payday loan, you’ll need to do some research on where you will get one. Some in-person locations can be slow and have extremely high interest rates. However, an online source like easyonlinepaydayloan.com can be preferable in both areas. Make sure you compare your options, just as you would with any other type of loan. The savings can be considerable.

#5: Future Considerations

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What happens after the payday loan – even after it has been repaid? Not only should you spell out how the loan will get repaid, but you should be thinking about how your finances will rebound. After all, it would be great to not have to take out a similar loan. Consider an emergency savings account for moments when you are hit with financial turmoil. Also, work on cutting down expenses so that you can save more money.

Overall, a payday loan is a serious step when financial problems hit. Make yourself aware of why you need one. Think through how much you need and how you will repay the money. Finally, take some time to consider how your finances can become healthy, which can start with an optimized budget and increased attention to savings plans.

Just because you file for bankruptcy does not mean that your life is over. There is hope for rebuilding your credit and getting back into a secure, fruitful financial position. Remember, you didn’t get into financial trouble overnight, and the problem won’t go away instantly, either. Commit to making sound financial decisions from here on out, and begin to establish better ways to manage your money. Wait six months to one year after your bankruptcy discharge before you seek a personal loan that will help rebuild your credit.

Image Courtesy of Leo Blanchette via Flickr.

Get Your Credit Reports

There are three major credit bureaus that keep track of reports submitted by creditors on their debtors. Start your quest for a loan by requesting your credit report from each of these companies. Go over it thoroughly. If there is any false or incorrect information on the report, follow the company’s procedures for contesting it. These companies have a reputation for accuracy, and will usually work with you to make sure your report is correct. Once you are aware of your credit score, you can begin to work towards getting a personal loan.

What is Your Current Debt?

If you have not yet filed  now may be the time. If your current debt is too high, there is no way to get a personal loan. However, if you have erased your debt through bankruptcy, you have a clean slate to start from. This is an important rebuilding time, so make sure you only take out lines of credit you can repay. Use the money for things of value, such as home improvements and capital investments. Avoid using credit for weekend shopping trips, vacations and other frivolous things.

High Interest Versus Collateral

When you apply for a personal loan following bankruptcy, you’ll likely face one of two things: the lender will either charge a high interest rate or demand that you put up collateral to cover the loan. Make sure that you will be able to make the monthly payments and that the loan is worth what it costs in terms of interest. Remember, any property or money you put up as collateral for a loan will be lost in the event that you don’t pay back the loan.

The Bottom Line

It is possible to get personal loans after a discharge from bankruptcy, but you’re on a different playing field than you were before. As soon as you reestablish your ability and willingness to repay your debts, your credit scores will go up and your ability to obtain credit in the future gets much better.