Should you take a payday loan?

Laura | Sep 8, 2009 |

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Have you ever found yourself short of cash at the end of the month? Maybe you had a particularly stressful month or had an emergency or home repair that you weren't expecting. These unexpected items often require you to use all of your free cash making it difficult for you to make ends meet.

When you find yourself in this predicament, you may have several options. You may want to ask a friend or relative if you can borrow a bit of money to get you by until the next month. Many people are uncomfortable with this type of scenario. Another option may be to obtain a payday loan.

To obtain a payday loan, you would need to find a payday lender in your area. Determine how much money you need to borrow and talk to the lender. They will typically have you write a personal check for that amount plus the amount of any associated fees or interest for the loan. They will hold on to the check until your next pay day or until an agreed date, and then they will cash the check at that time. In return, they will give you a loan for the amount that you need or that they have offered. On your next payday, your personal check will be cashed.

There is typically a cost involved with this type of loan and or interest. The interest rate and fees can be a lot higher than other types of loans you would typically obtain. If you can plan ahead a bit, you may want to go ahead and work with a local bank to apply for a personal loan. If your credit is in bad condition, this may not be an option for you. For this situation or if you need the money as quickly as possible, a payday loan would meet your needs.

If you decide that a payday loan is the right option for you, you should take out as little as possible to ensure that you won't be overburdened when they cash your check on your next payday. If that occurs, you may end up having to take out an additional payday loan. Because the interest rate can be so high with this type of loan, taking out as little as possible will help reduce your costs.

If you can take some time to plan, you may have some other options for finding that extra cash you need for an emergency or unexpected expense. You could consult your employer's HR department to see if you can reduce the amount of tax withholding in your paycheck. If you typically receive a tax refund each year, this may be a great option as you may not end up owing any taxes when you file. You may also want to consider taking a cash advance on a credit card if you have one available. Although that can be costly as well, the costs may be less than a payday loan. You will need to compare the options you have available.