Payday loans can get you out of a financial jam. The loans have high-interest rates. They are not cheap money, but in times of crisis, they can be helpful. Because of the high-interest rates, it seems like it is always a good idea to pay them back as quickly as possible, but there are many situations where that is not the case. Many times just steadily paying back the loan is best. The top four reasons not to repay payday loans early are if you have to:
1. Work Another Job
You might think that getting side employment is a good way for you to pay back the loan faster, but if you have to hire a babysitter, the cost of having to hire help may not offset the extra paycheck. You will have to ask yourself if it is worth it to spend more time away from your family also. If getting another job means you will have to drive a long ways, factor in the gas money and the wear and tear on your vehicle. If working extra hours at a side job is going to make you too tired to work effectively at your main job, it really may not be a good idea. If working somewhere else makes you so physically exhausted you cannot perform your other duties, paying back the emergency loan on the set schedule will be better than losing your job. You can find more resources available at the Speedy Cash website.
2. Borrow From Family
Borrowing money from family members can often lead to future problems. If that person gets in a situation where they need the money back before expected, it can be tough for them to ask you to repay it ahead of schedule. After loaning any money, some people may think you owe them now and may try to take advantage of your time by asking you to do additional work or errands for them. The worst-case scenario is the loan makes your relationship awkward or ends it all together.
3. Withdraw Money From a Retirement Account
When you take money out early from a retirement account, such as a 401K, there is an early withdrawal penalty, and you will have to pay taxes on the amount taken out. Retirement money is specifically set aside for that event, so to discourage people from tapping into it early, there are mandatory penalties in place. Also, the compound interest you will be losing on that money over the time because you did not leave it in the account to grow may not offset paying back the higher interest loan as planned initially.
4. Use All Your Savings
Wiping out your entire savings account to pay off another debt could leave you in a tight position if you need emergency cash. If there is an emergency and you do not have any cash set aside, you may have to get a high-interest emergency loan anyways. This financial move may not put you in a position to get ahead.
With most payday loans, there is a prepayment penalty that you should factor in your final decision also.