Oh no! JanuWorry is back
Just when you thought you had JanuWorry under control, your car breaks. Or your mother falls ill and you have to make an unplanned trip home. Emergencies are real. Fortunately, so are emergency loans.
No matter how well you manage your life, emergencies happen, bringing with them unforeseen expenses. When you are faced with an “I need a loan now” moment, the pressure is on. But it is important to take a deep breath and slow down long enough to make a good credit decision.
Many companies offer small loans online to get you through your emergency. In most cases, these are payday loans. This means you take out a loan with the intention to repay the full amount as soon as you receive your salary.
Unfortunately, many people don’t manage to do this, mainly because emergency loans come with sky-high loan interest rates and other fees that are often hidden, that turn the original loan amount into something entirely unaffordable.
As a result, consumers have to renew, or roll over, the loan with the hope of settling it the following month. But next month comes with its own surprises and the loan interest keeps adding up.
The combination of short-term, high-interest credit, and consumers who live very close to the financial edge, is what makes payday loans so dangerous. For many consumers, it is a debt cycle that sucks them in and eventually leaves them with almost no room to manoeuvre.
It is very easy for an emergency loan to become a long-term debt trap. Fortunately, it doesn’t have to be this way.
Save your way out of emergencies
The best way to ensure you don’t get caught in an emergency loan debt cycle, is to have an emergency fund you can draw on to get you through tough times. Yes, that means saving, and sadly many of us South Africans are rather bad at it.
You might think that you can’t save because you never have money left over at the end of the month. Here’s a different way of looking at it: budget to save just like you budget for any other expense. Even if you start with a small amount, the discipline of saving is important. And it is extremely motivating to see a little pile of money that grows and grows. Furthermore, the psychological impact of knowing that you have a safety net in case things go wrong, is a hugely positive influence.
Saving and budgeting, though, is just one side of the money-management coin. You should take further control of your finances by keeping record of your spending. Once you know what you spend your money on, and where you waste some of it, it becomes possible to proactively manage your finances and not be at the mercy of ruthless lenders.
If you don’t have savings when an emergency strikes and you have to take out a loan, choose your credit provider carefully. Small online loans can become big burdens. Bayport’s My Monthly Booster is a great example of a small loan that helps you manage an emergency without creating more problems than it solves. Linked to a Bayport personal loan, the booster is immediately available and you don’t pay extra fees.
But what if you already find yourself in a debt trap? Find help immediately!
The biggest mistake you can make, is to keep hoping that next month will be different. The sooner you get help, the sooner you can get out of debt. If you let the loan run, the repayments will eventually become completely unmanageable.
Go to someone who can help you get a complete picture of your finances, and with whose help you can draw up a plan to get out of debt first, and then improve the way you manage your finances.
There are many different sources of help, from human resources or employee wellness practitioners at your place of work, to trained financial consultants at banks or other financial institutions. Sometimes even a money-savvy friend or relative can be a good place to start.
The bottom line is that while emergencies are a fact of life, an emergency loan should never get you into financial trouble.