A while back, we suggested that payday loans can be used to save you money in certain circumstances, like with incredible discounted deals that have a time limit, or huge sales on travel tickets. But, these are generally limited opportunities with a very specific time frame. While payday loans are the perfect answer to these opportunities when your cash flow is restricted, it’s important to calculate whether or not you will lose the savings on the item you’re purchasing in the loan fees.
Most individuals use a payday loan to cover non-discretionary needs, but some do end up using them to cover discretionary-type wants as well. We don’t support the general use of getting a loan unless you absolutely need one, but we do understand there are situations that may seem discretionary, but actually are not.
*Please remember that if and when you do apply for a payday loan, you do not have to tell your lender what you’re using your funds for, and by law (in Ontario) the lender cannot ask. It is your business how you use your funds.
Non-Discretionary Uses For Payday Loans
-Rent / Mortgage Payment (partial or full)
-Utilities (water, heat, phone – home/cell)
-Groceries
-Gas / Bus / Train Fare
-A car repair
-A home repair
-A medical emergency (for prescription drugs or something not covered under your health or dental plan)
-For an immediate clothing need
-For a travel emergency
-For your pet (a medical emergency, food, etc)
-To help out a family member (please use EXTREME caution in these situations)
-Work related expenses for which you will be reimbursed later (the fees you pay, however, may not be covered by your reimbursement)
Discretionary Uses For Payday Loans
-Entertainment; family or friends show up last minute & you’re short on cash
-Entertainment; you have to entertain your boss or clients & you’re short on cash
-Emergency back up; you’re traveling and would feel a little better just “having” the cash in your bank account in case you need it (you can always pay it back early if you don’t use it!)
-Using it for an unbeatable, time sensitive sale where you actually come out ahead because of the savings on the item or service
Example: Airline Ticket Sale
You’re due to use up some vacation time in a few months and you want to spend some time traveling. You have a budget in mind, and know you’ll have to save up for it for a little while. Earlier than expected, a rock-bottom rate comes up but you’re short on the cash required to get it right now. Of course, these deals can disappear quickly, within a day or two, so you need to act fast.
For arguments sake, let’s say the ticket is $500 round trip (with all those lovely taxes and fees included already) verses the $850 you thought you’d be spending originally. The good news is that you’ve been able to save about $150 so far, but you have no other way of making up the $350 difference.
Consider a payday loan for this circumstance.
Let’s do the math.
The savings between what the ticket was ($850) and what it now is on sale ($500) is $350. There’s no way you’re going to spend that much in payday loan interest and fees, so this is a worthwhile transaction to make! The loan fees on this amount in Ontario would be $73.50 (in BC, the fees would be $80.50), which is a lot less than $350 in the price cut! You’d be ahead by $276.50. Not too shabby, right?
Of course, it’s important to make sure you can repay the loan and the fees on your next pay schedule. If you can’t, then do not go ahead with this transaction. Yes, you might lose out on a great airline ticket sale, but it isn’t worth defaulting on the loan.
