Should You Apply for a Payday Loan

There are plenty of reasons one might consider applying for online payday loans. They are generally short term loans, with high interest, for no more than $500. Most use them to bridge the gap between paychecks, hence their name.


Emergencies like unforeseen medical expenses, auto repairs, or helping a family member are the most common reasons to apply. Some may also be driven to a payday loan because they couldn’t get a bank loan. And since a payday loan doesn’t require a credit check, it can be the most attractive option for someone with bad credit.


To decide if one is right for your situation, you first need to know how payday loans work.


The process


Payday loans go by a variety of other names, such as cash advance loans or deferred deposit loans, but the process is typically the same regardless of the source. The qualifications for a loan aren’t very picky, so you’ll usually just need to provide information verifying your identity and checking account, request the amount for your loan, and pay the lender’s fee to have the loan placed in your account. You’ll generally have two weeks from the time of receiving the loan to pay it back.


The pros


The most obvious benefit to payday loans is that they’re instantaneous. They’re also extremely easy to obtain so long as you have a checking account. They are useful to those without credit cards because they allow you to make time-sensitive purchases anyway. Depending on interest rates, a payday loan might also be easier to pay back than putting an expensive purchase on a credit card.


A payday loan can save you from the interest or penalties of existing financial pressures. For example, the interest of a payday loan could be far less to pay back than the penalty for missing a major payment, so incurring “more debt” in the moment can pay off in the long run. This also applies to keeping up with credit card debt. A payday loan may be your only option if you’ve maxed out your card(s) or if you need to cover your charges.


The cons


Naturally, the biggest negative of a payday loan is that they can backfire by putting you in more debt. Payday lending laws vary by state, but the annual percentage rate (or APR) averages around 400 percent, so it’s imperative to pay back a payday loan as soon as possible. If you take out payday loans irresponsibly, getting stuck in this cycle will quickly become worse than the original problem.


Before agreeing to a payday loan, you should make sure it really is an emergency and that the cost won’t repeat later on. Payday loans generally aren’t a good option for recurring or unnecessary expenses.




If you’re having financial setbacks or credit problems, there are a variety of options you can consider. As long as they aren’t recurring issues, you should be able to negotiate with creditors. Most will understand if you are having a temporary problem and need some leeway when it comes to paying them back. If the situation can’t be put off, it might even be worth considering using your bank’s overdraft protection plan, if applicable. Even obtaining a new line of credit could be a preferable option, depending on the circumstances.


It’s usually safest to consider a payday loan as your last resort. If you decide it’s right for your situation, protect yourself as much as possible. Shop around for a lender with a good reputation and reasonable fees. Try not to borrow more than you can pay back with your next paycheck. Finally, make paying the loan back your top financial priority to keep it from getting out of hand.