Avoid payday or paycheck loans   
Author: Matthew Rankin

July 12, 2007

Posted in Debt Management | |

Whilst payday loans may seem attractive due to their ‘instant’ nature, the interest and fees which often rise above 100% of the actual loan amount mean you’ll be taking two steps backwards. When your pay day does roll around, you now be short around double what you took the loan out for meaning that for this week or month, things may even tighter for you.

There are however alternatives that are really worth looking at, especially if you have considered or used these types of loans in the past.

  • Ask to borrow money from a friend of family - whilst not easy to do, it will usually be interest-free and also can be arranged for the same term (until you get paid)
  • Talk to your bank. As long as your accounts aren’t in arrears (they don’t have a negative balance), most banks can arrange a short-term loan or overdraft for a small fee plus an interest rate that is still below most credit card rates.
  • Ask you employer if they can advance you part of your next pay packet. Again this is interest free and much easier to ask for than approaching friends/family in my opinion.
  • Look at online alternatives like Prosper.com which may put you in touch with someone who is willing to help you out.

    • Having to applying for a payday or paycheck loan should be your very resort. If you only need a small amount and can easily live without the repayment amount from your next pay then it may get you out of a sticky situation. It may even simply buy more time with the landlord for instance until you can apply for a personal loan - just remember that relying on this type of loan is likely to get you deeper into debt, and must be treated with extreme care.

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    One Response to “Avoid payday or paycheck loans”

    1. Matt Ellsworth Says:
      August 1st, 2007 at 4:18 pm

      These type loans are almost always scams when you look at the total fees/interest you will pay. If you roll them over you can quickly end up paying hundreds of %age in fees/interest. Simply avoid them. if you need the money that bad to cover a real emergency go to your friends and family, etc.

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