Avoid the pitfalls by following our four simple steps
Despite the bad reputation payday loans have in New Zealand each week borrowers are lured in by the promises of a quick fix by unscrupulous lenders. In most cases all a payday loan achieves is a cycle of ongoing debt. Before you turn to the quick fix, it’s important to know there are always other options out there.
Payday loans are often linked with predatory lenders and shady companies. Their ‘we lend to anyone’ mantra combined with substantial interest rates and non-existent customer service is a recipe for disaster. In every case, quick fix loans come with strings attached. And those strings can often take years to cut.
Some people may find themselves tied up with an unsavoury lender because of bad luck or terrible timing. But that doesn’t mean they should spend a lifetime paying for it. At best, a payday loan will have you paying terrible interest rates.
This means that a small loan can quickly spiral into massive debt. In our everyday work we often see the consequences of these arrangements – where borrowers have to take out loan after loan to cover their spiralling debt. It’s frustrating to know this pain could have been averted by simply doing the research on alternative options for emergency loans.
Here are four steps you can take to avoid the trap of payday loans.
1. Plan to fail (kind of)
Despite all the famous sayings about being prepared, life doesn’t always go to plan. You can pretty much expect that the unexpected will happen. It’s in our nature to plan for what we would like to see happen, rather than being realistic. Famous American speaker Randy Pausch said, “Another way to be prepared is to think negatively”. Far from being a pessimist, Pausch suggests a contingency plan is the best way to reduce the impact of life’s little (or big) surprises.
Create a contingency in the form of savings. We know this is easier said than done for many families these days, but we always suggest that people look at their splurge spending. If you can avoid the impulse purchases you could be well on your way to building up a healthy emergency fund. There is plenty of information online about budgeting and avoiding impulse buying. Next time you feel the urge to splurge take a deep breath first. Try some simple tricks too – like only buying a special item if you have the cash for it. Or wait for a week or two and reconsider if it’s something you really need.
2. Look at other ways to borrow
Payday lenders would have you believe that a quick fix loan is the only way to get out of a tight situation. But there are other options, and they may be right on your doorstep.
Consider asking for an advance from your employer. A pay advance may be able to be paid off with your next pay and doesn’t come with exorbitant interest charges. Another option is to borrow from a close friend or family member; this option is often interest-free as well.
Borrowing from friends or family can be a delicate operation. It’s hugely important here to remember the value of these relationships beyond the cost of the loan. Many families are torn apart by money arrangements. So always be careful with who you choose to borrow from and always be completely honest about your situation.
3. Sell up and step forward
The saying ‘one man’s junk is another man’s treasure’ is a good one to remember when you find yourself in a tight spot. With Facebook marketplace and Trademe both offering cheap, easy ways to sell goods, sometimes it’s simply a matter of a declutter.
You may be surprised at what you have lying around the house that is worth some cash, from the kids outgrowing clothing and sporting equipment to household items that are sitting in the cupboard gathering dust. Ask everyone in the family to make a pile of unwanted items that are no longer needed and put them up for sale.
If you can’t get the full amount you need to cover your needs, you can at least cut down on the size of the required loan. You can read more about this approach in our Spark Joy article.
4. Shop around
Emergencies often require a quick decision. And quick decisions come with risk as there isn’t time to do in-depth research and the first option can seem like the best. This is when mistakes are made.
There are better ways to access lending without having to turn to a payday loan. All it takes is a little time and research to find the right solution which doesn’t involve a payday loan.
QuickLoans differs from payday loan companies because we provide long-term loans based on sustainable lending. Yes, we provide fast and stress-free loans to our customers, but that doesn’t mean we loan to everyone. We won’t lend to someone if we feel they are in a vulnerable situation or living in a financially unsustainable way. Further lending here would only enable a downward debt spiral. Our cash loans are offered over longer-term periods and come with lower interest rates.
Considering a payday loan?
Here are the four things you need to do to ensure you get a better result:
2. Fill out the application form, attach all the necessary information (including bank statements) and send it off.
3. Wait for our response – we’ll be back in touch very quickly and, provided all the information is there, we can confirm your loan and deposit the funds quickly – even same day (after completing the documentation).
4. Step forward with confidence, knowing you can afford to pay the debt without negative long-term repercussions.
Quick fix, short term loans are designed to get people through to the next payday without considering the long-term impact of that loan. Payday lenders target people in a vulnerable situation and lack the time or ability to understand the high-interest charges, rollovers and hidden fees.
At QuickLoans we encourage everyone to seek out basic financial education, so they never find themselves in a position where a payday loan is the only option.
If you want to talk to us about applying for a loan, please call us on 0800 200 275 or apply online.
Ash is a professional content writer with extensive experience in business development in the financial services. Ash has founded businesses from the age of 19, including franchising ventures, and working alongside some of the largest retailers in the world.