Many people turn to payday loans as other financial sources dry up. The reasons why a person can no longer count upon the traditional credit sources are many. These include a credit limit that had been lowered by creditors, inability to pay down on their maxed balances, and so on. In fact, a bad credit utilization score is one of the primary factors that have contributed to the growth of the payday loan business. Needless to say that despite the bad reviews that we often get to hear about these short-term loan companies, they continue to remain one of the choicest options when people need emergency cash.

Convenience may be one of the factors that drive so many people to applying for a payday loan. After all, what can be better than applying for a loan in your pajamas and getting money transferred to your account the very next business day?  No running to the banks, no locating the nearest branch: it is just you and your computer! That is convenience for many.

However, there is the flipside to the apparently glorified facet of the payday loans. These direct lending companies have given people an easy access to alternative money. Unfortunately, most of these people are the ones who should curtail their expenses and cut back on debts. Instead of addressing the real issues they only look for a quick fix, and a payday loan is just that. A better thing to do before resorting to third party money is to understand credit utilization rates.

An easy way to find out your credit utilization rate is to get hold of all your credit card statements. Add up all the outstanding balances to find your credit card debt. Then add up the all the credit limits to find your potential debt. This means, if you charge every penny on every credit card this is the debt that you can be in. Now divide your credit card debt by your potential debt and you will get your credit utilization ratio. The lower this score, the better it is. Since one-third of your credit score is made up of this ratio, you should take this very seriously.

Contrary to what many intend to think, an individual can influence his or her credit score. Taking a closer look at your income and expenses is a good place to begin. Note your monthly take-home income. Do you have a budget for monthly expenditure? Do you have room for savings? What is the best way to use this ‘extra’ money?

One great way to take control of your financial situation is to use the ‘extra’ cash intelligently. Use it to build up savings that may save you on a rainy day and also to pay off a priority debt. Some may wonder why you should pay off debt and save at the same time, especially when you have the option to put everything on a credit card for a faster payoff pace. While apparently it may seem like a great idea, a savings is necessary to meet future financial emergencies, should they arise. In the absence of such an emergency source, you will end up stretching your credit limits further. Taking an online payday loan from a responsible company or using the credit cards may seem like good solutions at that time, but it should never be considered as your only answer. Although these are sometimes the only source that can save the day for people who do not have any ready savings, you can take steps to avoid such a situation. The idea is to use such resources when you have to, but to also know your limits. It is best to fall back on what you have already saved and then juggle the rest from such flexible budget categories as groceries, fuel, clothing, and the like. Following this rule will help you take the minimum possible loan.

Be thankful if you still have an access to credit or to a direct lender who is willing to give you short-term loans. While managing debt isn’t easy, it is doable. Start working on a budget and try to limit taking payday loans as much as you can.