Payday Cash Advance Loans: The only time you should ever use one

Payday loans – or payday cash advance loans – have become increasingly popular during the recession as people struggle to make ends meet and avoid missing payments or bouncing checks when money runs low but bills still have to be paid. But those who are experts in personal finance warn that the ridiculously high interest rates that companies charge to provide these short term loans is a one of the biggest lender rip-offs in America.

They point out that in terms of annual percentage rate or APR, the interest charged on a typical payday cash loan transaction is as much as 40 times what other lenders charge. They feel that these loans are such a bad deal for consumers that they should only be used in a dire emergency, when borrowing for a week or two to tide you over until payday will prevent you from incurring more serious financial consequences.

If your car needs to be repaired in order to get you to work, for example, and the only way you can pay for that is to take out a payday loan, then you might be able to justify it. Or if you will bounce a few checks – and get hit with charges of $25 or $30 each by doing so – then maybe taking out a single payday cash advance loan for $15 or $20 to cover those checks might make good sense. But ordinarily it is better to dip into savings or use a lower interest rate credit card advance in such emergencies.

So if you have no other way to borrow money and have no savings to fall back on, a payday loan may be sensible in a situation where it will save you from paying a lot more money in penalties or where it will rescue you from a bad situation like the loss of your job. But payday loans should never be used frivolously, for shopping sprees or things you do not absolutely need – because you wind up paying far too much in the long run.