Ways to Avoid High-cost Credit or Payday Loan

Looking for advice on how and when to avoid a payday loan or call it a short-term loan, small loan, fast loan, cash loan, ace loan, or online advance loan? Even if money is tight, there are plenty of ways that you can avoid high-cost credit and still get by. But how?

There are positive changes you can make to your lifestyle and your approach to money. You can avoid using small loans by making better decisions on how to manage the cash you have spare after paying your bills.

There are even ways that you can increase the amount of financial freedom you have without needing a pay rise from the boss.

In this article, our researchers have examined the very best ways on how and when to avoid these loans.

1. Budget Monthly to live within your means

Your first step should be to put together a monthly Financial Plan to live within your means.

When you are careful with money, you can make it go a lot further. And, you might even be able to put money aside for emergencies.

Loans for people with bad credit profiles might feel like a temporary fix but remember that you have to pay it back with interest.  If you take out a loan, you will have the money when you need it but you will have less in the long run.

2. Avoid a payday loan by avoiding impulse purchases

The amount you can save when you avoid impulse purchases surprises many people.

The coffee you get every morning before you go into work may cost you AUD1,000 a year. Grabbing lunch from the nearby local supermarket every day might cost you another AUD1,000 a year.

By making your own coffee and lunch, you could half these bills over the year – sometimes, you will even save more.

To avoid impulse purchases, make a 30-day list. Your 30-day list will contain treat items you can buy using your discretionary budget. Keep the list on your phone and check it often.

If you have to buy something on your list and it will not put you in any financial difficulty, buy it. Yet, if you hold off and keep revisiting your list, you might decide you do not need that dress or new tablet after all. If that is the case, then you should cross it off your list.

It is not always possible or desirable to avoid impulse purchases when you really want something.

If you decide that you do, shop around. Check to see if there is a sale on and the item you want is part of the sale. If it is not, try Amazon or eBay.

Your treat item in a month might be to spend AUD50 at their sales event. But, if it is not on your list, it might be best to avoid browsing the sale. This is because retailers know how to put pressure on you to buy before you have had the chance to consider if you really want it or not.

3. Use comparison sites to spend less and avoid a loan

One great way of cutting down on the amount you spend is to use comparison sites. You enter your personal details and you will find the best deals available to you on:

  • Gas
  • Electricity
  • Insurance
  • Television subscriptions
  • Holidays and flights

Many companies spend all their time on getting new customers, rather than rewarding loyal ones.

4. Set financial goals to avoid borrowing

If you set financial goals for yourself, it is equal to having a monthly budget plan but on a much bigger scale.  When they set financial goals, people target either the reduction as their target for the next 12 months.

Every time you make a repayment, your credit score will improve. This means the next time you need finance, you will get more companies offering money over longer periods of time at better rates.

Remember that every time you pay the debt down or off, your discretionary budget goes up because you are paying less in interest.  You may not be able to clear off your debt this year but what you do may mean it is possible next year.

5. Why is it better to avoid a short-term loan?

There are many reasons why it is better to avoid a short-term loan. If you need one, you may not have any money left in your current account and no savings you can use to cover temporary cash shortfalls.

One of the main reasons why it is better to avoid a short-term loan is because of the higher interest rates charged. These higher interest rates make it harder for people to pay them back, putting them at a higher risk of default.

If you do not repay a personal loan on time, you may end up paying more in interest. What’s worse, your credit score will deteriorate further.

Perhaps the biggest reason why it is better to avoid a short-term loan is it suggests a borrower has to rely on credit just to get by.

If that is the case, it is a worrying sign that a borrower’s debt might be spiraling out of control. They may be using one form of finance to pay back the interest on another.

6. Avoiding payday loans: Summary

Where possible, avoid payday loans. Instead, focus on making the most of the money you earn each month with monthly budgeting and shopping around for the best deals.

A few simple changes to your life and your attitude to money could mean you have more to spend on the things you want in life.

If you are really in need of quick cash for personal expenses, apply for a payday loan with My Cash Online today.

*Disclaimer & Example: For our Small Loans of $2,000 or less, an APR (Annual Percentage Rate) doesn't apply. These loans are fee-based only with a term between 62 and 180 days, and so the APR is 0%. The establishment fee is 20% of the amount borrowed and the monthly fee is 4% of the amount borrowed. Representative example: a loan of $1,000 repaid over 3 months equates to a total amount payable of $1,320 comprised of $1,000 principal (amount borrowed), $200 establishment fee and $120 in monthly fees. The maximum comparison rate on loans between $300 and $2000 is 199.43%.
For our Medium Loans between $2,100 and $5,000, with a term between 2 months and 12 months, the maximum Annual Percentage Rate (APR) is 48% (Comparison rate 65.6597% p.a.) and there is a $400 Establishment Fee. A Medium Loan of $3,000 borrowed over 1 year would equate to a total amount payable of $4,289 (including a $400 establishment fee).

Under the current legislation, most small personal loan providers don’t charge an annual interest rate (you’ll know this as an APR %). The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. The maximum comparison rate on loans between $300 and $2000 is 199.43%. This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

© 2023 Owned by Australian Synergy Finance Pty Ltd, ABN 54 613 655 646. Australian Credit Licence 490422. The information on this webpage is general information only and does not take into account your objectives, financial situation or needs.