Payday loans seem so tempting; get your money now and pay them back at salary day. The interest is high, but whatever – you can afford $10 or $20. In addition, the loan process is so simple: if you deliver your application, you got your money! A goldmine if you are short of money …or not?

Let us go deeper into the disadvantages of payday loans:
1. The interest is huge. $10-$20 per $100 borrowed. Of course, this is affordable as a one-time fee, but if you are using a payday loan service once, then you are most likely to repeat this action, which bring us to the next point…
2. If you are short of money this month, then you are most likely short of money next month (because you have spent some of your salary in advance).

A payday loan that cost $20 per $100 borrowed, taken 10 days before payday have a yearly interest rate of $730. You might think: who cares, I can afford $20. Maybe you can, but if you are likely to repeat payday loans then your annual cost for $100 per month is $240. You do not need a payday loan if you can afford this amount.

Theory, you will say. I need money now. Do not panic; look at the alternatives to payday loans:

1. If you are due to payments, call your creditors and ask for a delay to you payday. Most creditors agree to this and the interests, if any, are usual much cheaper than the payday loan fee.
2. Use your credit card if you have one and pay back before due date. Most credit cards do not have any interest if you are paying back within a month and the cost of withdrawal is lower than $20 per $100.
3. Ask your local bank for a loan of the same amount as the payday loan amount. You will get much lower interest and, if you want, a repay plan.
4. Ask for a loan quote on an Internet bank, the time before you get the money might be 1-2 days longer than with your local bank.
5. Ask your employee for an advance payment.

When should you consider a payday loan?
If you really need the money and all of the above suggestions are out of the question, then payday loan might be your solution. However, try to let it be a one-timer…

Fredric Johnson