Both personal and payday loans are two of the most well-known types of loans out there. Personal loans get you things like a house or a car, and payday loans simply help you “float” till payday.
But regardless of which type of loan you have, you absolutely must pay off either type of loan. In order to help you keep tabs on how each loan affects your budget, perhaps it will help to clarify the differences between the two.
A personal loan is, more or less, secured debt—meaning you’re locked in at a certain interest rate that the bank cannot change. Payday loans, however, are unsecured debt, which means they’ll hook you with a small—or zero-level—interest rate, then get you from behind with a super-high rate later on.
Now, this is not to put you off payday loans. They can be extremely helpful if you need quick cash for medical emergencies, or you need to get your car fixed immediately and you don’t have any other way to get to work.
But here is where many people trip up. They don’t often think that payday loans are anything to really worry about. They just think of it in terms of “quick money,” as if they might be borrowing from their parents or siblings.
This is far from the truth of it. Like any loan, you still need to go into the payday loan office on payday and pay back that small lump of money you were given. “Small” in this case, being a few hundred dollars as opposed to, say, a huge lump sum in the thousands
It would be no different than having a truly strict relative warning you that they want their borrowed money returned with interest.
Balancing Your Personal Budget
Whether you use a personal loan to purchase something big or you use a payday loan to secure immediate cash before payday, you need to keep your budget under control so you have the money to pay both off. And it’s more urgent to keep track of your finances so you can cover the money for the payday loan, because it’s not like a personal loan where they give you a longer time to pay off the balance.
Yes, keeping track of a personal budget is challenging for quite a few people, but in truth, it is only as difficult as you think it will be. This is the key to making sure things are paid on time so you end up with a stellar credit score after all is said and done.
A way to manage your money for either payday or personal loans is to go through how you spend money and perhaps cut back on a few expenses that are not really necessary at this point in time, or at all. If you like to get coffee out while running errands, maybe that expense could be curbed by making your own coffee to take with you.
This is just the tip of the iceberg when it comes to managing money and your debt load. Just remember that if you’re having problems paying back payday loans, you might want to take a good look at where your money’s going. Because if you are having trouble with just a payday loan, think of what you’ll need to do to manage a much larger payment, such as for a house or car.
Managing your money and your debts surrounding payday and personal loans is as simple as knowing where your money goes, and keeping track of what goes in and what comes out of your account can provide you with the peace of mind that just approaching money matters willy-nilly cannot and will not ever give you.