Usually when most consumers hear the phrase “payday loan”, alarm bells start ringing in their heads. Who can blame them? The media has painted payday loans as the bad guy.
Well, the reality is that, payday loans are exactly what they are: they are loans. They are neutral financial instruments that can produce a lot of good in the hands of some people and could produce a lot of bad when abused by some other people. That is the bottom-line.
Just like your credit card, it is neutral in and of itself. It’s how you use it that can make it either a good thing or a bad thing. With that said, the reality is that payday loans pack a high interest rate, nobody can deny that. The reason why they have such a high interest rate is that they are made to be temporary loans.
They are basically the interest rate you are being charge is the replacement rate for that short-term loan. They are not intended to be long-term loan instruments. In other words, they should be loans of last resort.
Here are top three situations where taking out a payday loan makes a lot of sense:
1. You can’t secure a credit card cash advance in time
Usually, it takes some time to get a credit card advance check. A lot of the times your credit card company would mail this to you, but in the situation where you don’t have that check, from your credit card company, for a cash advance, you might have to wait a little bit longer for you to get that cash advance check. If that’s the case and you’re really pressed for money, taking out of payday loan makes a lot of sense.
2. Your payday is coming but you don’t want to pawn stuff
If your payday is coming, and you have no other sources of emergency cash, but you’re sure that you are going to be able to cover your payday loan it probably makes sense.
It probably makes a lot of sense to take out a payday loan because the other alternative would be to pawn stuff – like rings your mom gave you jewelry from grandparents or other items that have sentimental value.
You don’t want to do that, because usually when stuff is pawned, it’s often hard to redeem. Because you either forget, you let time pass, meanwhile the interest rate is piling up, and a lot of things can happen. It’s better to just avoid the pawning stuff altogether.
3. The emergency knocks out your credit card advance
Life is funny, emergencies happen in all the time. Murphy’s Law is always in effect. The worst will always happen at the least expected time. Expect it.
So when a financial emergency happens and it soaks up all your cash and knocks out your credit card reserve and credit card advance then it’s time to step up to the plate with a payday loan. Of course when it comes time to repay, your payday loan should be your highest priority.