Don’t Let Debt Cloud Your Judgement


Few of us can make good decisions while under pressure. Most of us are like Phil Dunphy, and though we may not get the last alpaca, stress gets under the skin of the average American and causes us to make questionable choices. This is especially true for those individuals searching out small dollar loans. When facing down a bill with a looming deadline, cash hungry people often choose the quickest solution — not necessarily the best.

Applying for a loan outside of your means is no way of managing your responsibilities. It’s just substituting one debt for another. It seems obvious when you have the luxury of distance, but when in the middle of one of these financial crises, it’s harder to keep your head and much easier to make this mistake.

That’s because stress affects the way you perceive and evaluate information. In an article in the Association for Psychological Science, scientists published their findings on how stressed-out individuals tend to focus on the potential positive outcomes of a particular decision without giving the associated downsides enough thought. The reward of the decision — in this case assistance from a questionable loan — outweighs the stick — the rates and terms that make it difficult to repay.

Though this may be your unconscious reaction to such a situation, it’s not your only course of action. With a little self-awareness and dedication, you can avoid potential dangers to your finances, so you can focus on lenders that make it possible to pay for responsibilities without dooming your future finances. And the time it takes to find them is relatively negligible, as long as you know to look out for the following features:

  • Licensing — In order to do business in your state, the lender must have earned a license by the government to issue small dollar loans and personal lines of credit. What this certificate entails may differ according to your location, but lenders like MoneyKey, an accredited direct lender, Credit Access Business, and a Credit Service Organization, will have the appropriate license they need to provide reasonable financial products.
  • Clarity — The financial world has a habit of over complicating relatively simple things. It doesn’t help that there’s specific shorthand for many of the products that could help you solve your cash flow problems. APR, LTD, and LTV Ratio are just a few examples of financial terminology that could leave you confused. It’s important to find a lender that takes care to explain any short forms or acronyms they use on their website or in their contracts. Complex, confusing language is a strategy used by predatory companies hoping to conceal hidden fees.
  • Customer Service — Ultimately, your choice of financial product is your decision to make, but a lender can help clear up any confusion you may have over their small dollar loans. You should expect assistance from knowledgeable loan specialists who can walk you through their list of products and practices, so you’re never confused about what’s to come with your loan.

But perhaps the most important step before you check for these features is establishing a budget. There’s no greater tool for understanding your capabilities than a financial plan. It will show you exactly where your money is coming and going — and when. Without it, you can’t be certain the size, rates, or terms offered by a lender meets your needs.

Take a deep breath, and get down to business. There are a variety of online tools available for you in case you’ve never made a budget before. Once you’ve tallied your income and expenses, you’ll have a better understanding of just how impactful the stick of your choice can be. Don’t make the decision purely on convenience due to stress; make sure your lender is a licensed company that follows transparent and supportive practices. It can help you find a loan within your mean