Is getting a payday loan a good idea?

As you already know, payday loans come with a short term. They are in effect an advance on the borrower's next paycheck- but that convenience comes at a high price. Payday loans also come with astronomically high interest rates; it's not at all uncommon to pay more than 2-300% interest on a payday loan. These loans make credit cards look cheap by comparison! In most cases, they are not an ideal financial solution.

Payday lenders claim they are providing a valuable service, one that thousands of people use every week- and more than ever, people are turning to these loans. However, there's a very fine line between providing a service and taking advantage of people, and some less-ethical payday lenders tend to cross that line. Those that advocate for the payday loan industry say that they should be used sparingly and as a last resort, but if you start using them, you will likely get pulled into a vicious cycle of fees and interest payments.

Payday loans are usually touted as a way to tap into an "emergency fund", but they really are not. These are real loans that carry a very high price. You would, in most cases, be much better off creating a real emergency fund. If you are in dire straits and need money quickly, try negotiating a payment plan. Most payday loans are for less than $1000, so you may be able to pay down your debt with a series of payments and save hundreds in interest fees.

There are some limited circumstances where a payday loan could be useful, but their usefulness depends on the borrower's ability to repay the loan before its term expires. For the majority of people, payday loans are not the best idea and should be used only if all other avenues have been exhausted.