Payday Loans Are an Option But Should Be Avoided if Possible

There are times in everybody’s lives where they are at a shortage for money.  While many people can often turn to family in their times of need, many more do not have that option.  They have unexpected bills that pop up, and they simply have too much month left and not enough paycheck.  Ideally everyone would have an emergency fund that would help them through these tough times, but that is simply not the case.  For most people, they have to turn to payday loans to get the help they need.

A payday loan is a short-term, low dollar amount loan that a person can get to help pay off some extra bills that come around.  The loan is generally collateralized by a person’s proof of income.  Simply bringing in a pay-stub will allow them to receive a loan of (usually) the amount they receive when they get paid.  The loan is set up that the borrower pays a flat fee, often around $15 or $20, and has two weeks (or until the next payday) to repay the loan.  If the loan is not paid off, it simply renews, at another flat fee, for another two weeks.

These loans are utilized by thousands of people because they are an easy way to get a boost when it is needed.  Rather than pay late fees that are charged when a bill is not paid on time, and rather than pay the fee associated with a bounced check, it is easier to take out a small loan and pay it back when the money comes in.  The loans are simple to get, they usually do not require a credit check, and as mentioned only a paystub (plus a valid ID) is required.  They are widely available and most states have stores that specialize in this type of loan.

When used properly a payday loan is a great tool for those who have no other options.  However, they become very expensive if they are not paid back quickly.  In fact, many states have banned them saying their rates are usurious.  If you look at the APR, the loan is incredibly expensive, but the loan is also not designed to last more than two weeks.  When people start using these payday loans, they can often get into a cyclical trap where they are always behind, and every payday they are getting another loan to help make it through the month.

The loans can be a great resource when they are only needed once.  The small fee is not much compared to the devastation that can happen when bills go unpaid.  But they also need to be paid off quickly, and used sparingly.  Those who find themselves needing a payday loan need to cut back on expenses and start an emergency fund.  That way they can get away from the loan, and back to supporting themselves.

Has anyone been forced to use a payday loan before?

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