What to consider before getting a payday loan

In any economy, there are often times when you may find yourself a little short of money. Whether it's from an unexpected expense, illness, or increase in your bills, being short of money may lead you to consider getting a payday loan. But before you do, there are some things you should know.

The first and most important thing to know about payday loans is that they are intended for short-term use only. In a typical payday loan, you write a personal check for the amount you need to borrow. The lender holds that check for a specified period of time, usually 1, 2, or 4 weeks, before attempting to collect. Some lenders will then run the check through your bank, and others allow you to bring in cash to pay the loan, at which time they give you back your check. The lender may charge a flat fee for the loan, or a percentage of the borrowed amount. Read all information before signing up for a payday loan, so that you are fully aware of exactly what the loan will end up costing you.

When you need to get a payday loan, you must always be sure to only borrow what you need and can pay back in the required time frame, even if you qualify for more. Most lenders will allow you to renew or roll over a payday loan if you can't pay it back in time, but each time you do so you will pay an additional loan fee. Some people may equate this to making monthly payments on a credit card, but it's not the same at all. Credit card percentage rates are typically lower than payday loan fees, and payday loan fees are due more often than interest on a credit card would be. If your circumstances change further and you can not repay your payday loan in full when it's due and still have money in your pocket, consider at least paying back a portion of the loan. You may end up paying a smaller fee, and you will have less to pay off when the next loan period expires.

Finally, make sure you really need to get a payday loan. Many creditors, mortgage companies, landlords, and utility companies will work with you if you let them know you're having financial problems and need an extension on your payment. It is much easier for creditors to work with you, and you may be pleasantly surprised at how far they may go to help you. This especially applies if you've had a good payment history or a long business relationship with them.

Getting a payday loan can be a perfect solution for a short term financial crisis, if you take the time to educate yourself about the process and exhaust all other avenues first. Be careful not to fall into the trap of renewing or extending payday loans multiple times, and you'll be back on solid financial ground in practically no time at all.

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