As much as I advocate the use of payday loans when faced with financial emergencies, I also think wise to look at the other side of the coin from time to time. As such, let us examine, more closely, all the hullabaloo about payday loans being “bad.” If you do a search on the Internet about payday loans, the chances are that you would get some results that would tell you to stay clear of payday loans. How real is this threat? Are these positions justifiable?

To be honest, yes, there are some pitfalls when it comes to taking out payday loans. Then again, isn’t it the same for most any other activity or endeavor? Abuse something and you will see how bad it can get. Enter an agreement without being properly or adequately informed or equipped and you just might get burned. The same thing goes for payday loans.

One thing that you should know about payday loans is this – they are meant to meet short term financial needs. As such, if you borrow money using a payday loan, you should be able to pay it off within the specified amount of time (as with any other type of loan, actually). The thing is, the specified amount of time is usually shorter than other loan repayment schemes. If you do not know this fact, you can be in danger of being overwhelmed with the fees associated with payday loans that are not paid on time.

The thing about payday loans is that they do not come with an interest rate. Instead, they charge fixed fees based on the amount that you borrow. However, when you are not able to make a payment on time, you will be charged additional fees. Now, these overdue fees could be astronomical, depending on the payday loan provider that you patronise. For this very reason, there are people who tell the world to stay clear of payday loans.

For my part, I think that financial sense comes into play here. It is true that payday loans can be more expensive than other loans. Yet how about the convenience and speed associated with a payday loan? Where else can you get a certain amount of money without having to leave your desk, not having to go through a credit check, and not having to turn in inches of paper for documentation purposes? More so, where else can you get money within a few days (at the most) without thousands of questions being asked? Indeed, it is but reasonable for payday loan providers to charge a bit more than other loan types.

Now, it is up to the borrower to be able to discern how much he should borrow depending on how much he is able to pay. This responsibility lies with the borrower, not the payday loan provider.

With these things in mind, I believe that saying a vehement NO to payday loans without solid basis is not rational. Instead, consider it as an option, borrow wisely, and make sure that you can pay off your debt within the specified amount of time.

This entry was posted on Thursday, January 10th, 2008 at 12:47 am and is filed under Debt, Loans, Personal Finance, Advice . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.