Credit cards have become easily accessible but not many people know how to use them properly. People who don’t know how to manage their finances properly usually have mounting credit card debts which leads to financial problems.
With today’s advent of technology, a lot of digital platforms have become available for easy access of credit. Aside from the usual credit cards which undoubtedly one of the easiest sources of credit, there are also digital lending platforms for payday loans.
Payday loans are small, short-term unsecured loan. Unsecured loan means you don’t need to have collateral for it. The word ‘payday’ means that the loan needs to be repaid at the borrower’s next payday. Typically, some verification of employment or income is involved to assess creditworthiness and capacity to pay of the borrower.
RoboCash is one of the online payday loans and applying for a loan from them is very convenient since you don’t have to leave your house to apply because the application process is done online and is fully automated with no guarantors and no documentation needed.
However, as these are all loans, they carry interest rates. Credit cards typically bear interest rates of 3% to 3.5% per month while digital lending platforms carry interest rates from 15% to 60% per month.
In the case of Robocash, their interest rate goes at 2.5% per day. With this hefty interest rate, there is rarely a case where loan applications with a 30-day term limit is approved. Therefore, it would be beneficial if you only apply for a loan for emergency purposes and you should pay it as soon as your capacity to pay allows you to avoid accrual of interest.
Whether you availed of a loan through credit cards, digital lending platforms, or by any other means, here are some of the ways to keep a good credit standing:
Get Only What You Need. Get only the exact amount of what you need. If you only need 2,000 to pay for electric bills for example, then get exactly that amount enough to pay for it. This is to avoid spending for other unnecessary things called ‘wants’ since if you have excess money coming from your loan, you may be tempted to spend it on things other than its original purpose.
Pay in Full. Remember to pay the full amount of your loan on or before due date to avoid penalties. Aside from accumulating more debts through the accrual of penalties, paying in full also gives you a peace of mind.
If you can’t pay in full, as in the case of credit card debts, make sure to allocate a specific amount of your salary every payday to pay for it. Every time you get a windfall such as that of a performance bonus or 13th month pay should be allocated in paying your credit card debts in full to avoid penalties.
Pay Yourself First. Paying yourself first is one of the best ways to save money. As most of us are employees who rely on our salaries for living, you should use the equation Income less Savings equals Expenses. That is, every time you get your income from your salary, save first before you spend. As to amount that you need to save, you should save at least 20% of your income based on Pareto’s Principle of 80/20.
Budgeting Will Save You. A good way to budget is to use the envelope or jar method where you have envelopes or jars that have names on it for every need that you have such as your utility bills.
After saving the 20 percent of your income from paying yourself first, fill these envelopes or jars with the amount of money required to pay these bills. In that way, you are assured that these bills will get paid on time.
Aside from using the envelope or jar method in budgeting, you should also track your expenses using apps. Nowadays, there are a lot of mobile apps that you can download to your smartphone. Once you determine the allocation of your expenses, try to cut and minimize those expenses that are related to your wants. Always remember to prioritize your needs versus wants in terms of your expenses.
Have Multiple Sources of Income. If you are already in bad debt and your current income is not sufficient to pay your debts in full amount, try to source additional means of income. Aside from supplementing your income to pay for your debts in full, having multiple sources of income means when one income stream fails, then there are still others which you can rely into.
Credit cards and digital lending platforms are there to help you in times of emergencies or urgent financial needs. Do not use them to instantly gratify your wants or you will end up having more bad debts through the accrual of penalties. This is the start of your financial quicksand which will drown you into financial distress.