Payday loans have often been touted as the worst kind of loans available on the market. However, if managed well, these loans can easily be paid off and you could get out of debt within just 30 days. There are several firms like HeartLoans.co.uk that provide short term advances at a very reasonable cost. They have years of experience in lending to individuals in need and provide a plethora of options for loan repayments too.

What are payday loans?

To put it simply, these are very short-term loans that are disbursed to individuals 18 years or older who are employed at least part time by an organization. A defining factor of these loans is that they must be repaid when your next paycheck arrives. If you take a loan on 15^th and your paycheck arrives on the 1^st, that day becomes your loan repayment date. There is no complicated math that goes in these loans. The plot is simple- you have a need for which you need a loan. You keep your paycheck as a guarantee and take out a short-term finance. As soon as your paycheck arrives, you pay the amount back with interest. That’s it.

The rates of interest on these loans is also often very high because of which most people avoid taking them in the first place. If you are unable to make a payment, you could dive deeper into the debt cycle, which could be very harmful for your finances. It is quite easy to land in the payday loan trap because they are very easy to get.

Are payday loans that bad?

Just like any other loan, it is all about management. If you have bad financial habit, a payday loan will be the biggest mistake of your life. However, if you know how to handle your finances, it could be a boon. Let’s understand this with the help of an example.

John earns $1000 a month of which he spends $600. He puts $100 each in his debt payments and savings accounts. The remaining $200 is his discretionary expense. He is often able to save 50% of this amount.

Gary on the other hand, earns $1000, of which he makes lavish purchases that cost him close to $900. He is usually out of money within the first week of the month and has zero savings.

Both need to buy a new gadget that costs $250, for which they take a payday loan. They must pay an interest of $25 on the amount and return on the first of next month. John has some amount in his savings back account that he could tap into and pay the loan. Because of his good financial habits, he could even save those $275 and pay for them without touching his savings account.

Gary, on the other hand, will mostly likely default on his payments and stay stuck in the debt cycle forever.

This is just a small example that shows that no loan is inherently bad. It is our financial choices that make it good or bad.