While the holiday season isn’t the only time families are experiencing tough economic realities, the fact of the matter is that this season has seen more in the way of financial crisis than other shopping seasons in recent memory. While the holidays may be over, the debt that they bring will last many families for months to come. In some cases, that holiday debt still won’t be paid off when it’s time to start next year’s holiday shopping, creating a truly vicious cycle.
One method of getting cash that experts are especially cautioning against this year is payday loans. Payday loans are short-term loans that usually last about two weeks. They’re designed to help a customer who has a short-term financial need that they can’t meet until their next paycheck.
If you’re able to pay off that payday loan on your next payday, you’re not in too bad a shape. Chances are you paid a fee of a few dollars, and even though that translates to an annual percentage rate of interest in the hundreds of percents, it was a relatively low one-time fee.
The problem comes when you need to start stacking or rolling over payday loans. Your payday lender is usually more than willing to extend another payday loan to you when yours is up. That’s because the lender is, of course, going to be able to collect another fee. You’ll find that if you renew a payday loan more than once or twice, chances are pretty good you’re going to wind up paying more in fees than the amount of your original loan.
Payday loans aren’t the best vehicle for purchasing Christmas gifts, of course. If you have other options, whether it’s a personal loan from your bank or borrowing money from relatives, you should pursue those options. If it’s truly a matter of waiting for a paycheck, sometimes you may just have to delay your gift giving until after the holiday. It sucks, but in the long run it’ll save you tons of cash.
Another source of cash that people often turn to during the holidays is pawn shops. While it might seem like a good idea to sell off a precious family heirloom in order to supply this year’s presents, chances are you’re going to regret that too. The key here again is patience. Yes, if you have unwanted possessions you can hock them, but don’t give away grandma’s broach just because you want to buy a GI Joe for your son.