Payday Loans 101 – Part 1 – Make a Payday Loan Work for You!

One day on my way to work, I pulled into a parking lot to grab a bagel and coffee and bouldered right into a small pipe protruding from the pavement. And as you’d guess, it just so happened that this pipe came up to about my radiator’s height.

I knew it was bad as soon as I saw the wince on the guy-who-witnessed-the-entire-thing’s face. As green liquid oozed out from under my car, I finally grasped the meaning of the word “accident”. There’s never a good time for them, and we’re never really prepared for such an unexpected inconvenience.

On top of the shame of having gotten into an accident with myself, I now had a huge bill to pay. And I just didn’t have the money. AND, I didn’t use credit cards. So, I decided to use a payday loan just this once. And, I’m alive to tell the tale.

What is a Payday Loan?
A payday loan is a short-term loan that caps out at around $500 to $1,000. The idea behind a payday loan is that it allows you to cover a sudden expense that you can’t afford at the moment, but you can afford once you get your next paycheck.

Since payday loans give you access to quick money, the borrowing rate is insanely high. They are definitely not supposed to be used for dispensable items, like say a TV. This is a dire emergency type of situation, medical emergency, car issues, etc.

Why Use a Payday Loan?
Payday loans aren’t all evil if you play by the rules. Let’s say you need to borrow $500 today. A payday lender will ask you to write a pre-dated check or authorize a debit that you must honor in 14 days. But, you’ll owe them a finance fee on top of the $500 you borrowed, maybe $80 (it’s likely that it would be higher). If 14 days come and you pay them $580, you’ve played the game well. You’re free to go. In fact, I’d say this is the ONLY way to play the payday loan game. If you can’t do this, don’t get one! (I go into why you shouldn’t in the next segment).

So Who the Heck Would Use One?
Payday loans appeal to people for several reasons. First, there’s no credit check for getting this type of loan, so basically anyone with a checking account can have instant access to this money. It’s also used by people who don’t have any credit cards or a savings account. If an emergency happens and you have no way to pay a huge bill and no credit card to fall back on, a payday loan is an option.

Payday loans can help by offering a nice safety net in an unexpected situation, but you really have to be responsible to play this type of game. If you don’t pay a payday loan off immediately, then you’ve lost. But of course, you have some options.

Next time, we’ll visit the dark side of payday loans. If you’re familiar with the negatives, then you should definitely tune in, because we’ll give you some hope for paying your payday loans off.