Posted on: 26 August 2015
You're in a situation that makes you really want to get a cash advance loan, but you've heard negative commentary about these financial products. You can't see any other way out of your trouble, so would getting this type of loan really be all that bad?
Payday lending companies charge higher interest rates than the norm because of the relatively high risk of default. These companies typically don't require a credit check, for example, so they can't evaluate the likelihood that the borrower will actually pay the money back.
The high interest rate is the reason financial advisers try to steer people away from these loans. However, sometimes a payday advance loan is better than the fallout from letting a current situation get worse.
Some Valid Reasons to Get a Payday Loan
Payday loans should primarily be used for emergency purposes when you don't have any other way to get fast cash. Does your current circumstance fall into these categories?
Paying Essential Overdue Bills
If you are behind on your rent, you may face eviction if you don't make the payment by a certain date. Being evicted typically causes more problems than getting a cash advance loan does.
This reasoning is similar for the prospect of having your electricity or heat shut off. If no government-sponsored or charitable funding is available or you've exhausted your emergency assistance, a cash advance may be necessary.
Getting Essential Vehicle Repair
Essential vehicle repair means the service is truly necessary for you to avoid more serious trouble. For instance, you may have no other way to get to work. If you do not have access to public transportation, a taxicab, or a ride from a friend or co-worker, you might lose your job if you don't get your vehicle fixed.
Obtaining Bail Money
When someone you care about has been arrested, prevailing law or a judge may have set a cash bail amount. A bonds service won't cover cash bail. If the bail is a larger amount and a bail bonds service would provide the bond, you would still have to pay a fee to the service. You and your friend may not have these amounts available without a fast cash loan.
Sometimes the arrest affects your own finances in a direct way. If this individual is your spouse or domestic partner, for example, you may rely on their paycheck for household income. If they have to stay in jail, they could lose their job.
Nonessential Reasons for a Loan
Sometimes people decide to get a cash advance loan for a reason that feels necessary but really isn't. Do any of these circumstances sound like your current situation?
- You got behind on credit card payments and are getting collections calls every day; you want the loan so you can catch up
- Your smartphone or washing machine cannot be repaired and you feel you need another one right now
- You could borrow money from a friend or relative but feel too embarrassed to do so
If you're thinking of a payday loan for these types of reasons, it's best to avoid taking on the high-interest debt. Sell some things you no longer need, or get a part-time job that generates some fast cash. For example, you might wait tables or tend bar so you can get tips.
Or bite the bullet and ask that friend or family member for help.
The main reason payday loans get some bad press is because many individuals can't pay the money back in a timely manner. That can lead to paying high interest rates over many weeks or months, renewing the loan several times, or defaulting and having to deal with collections.
Be aware that if you truly need a cash advance loan, your financial state is problematic. It's important to resolve this by learning how to budget, cutting expenses, creating an emergency cash fund, paying off debt, and generating more income. Then you can use this current loan for your one-time emergency situation and rely on other strategies in the future.Share