Payday loans can seem like an easy way out of temporary financial problems, giving you a lifeline to cover your bills until your next payday. There’s a darker side though that not many consider until they’ve experienced it for themselves: payday loans are addictive.

If the loans are used to cover basic living expenses, they only serve as a sticking plaster hiding more serious underlying problems with your budget. It’s easy to get into the habit of taking out a new loan every month just to get by.

Most payday loans are cripplingly expensive. An average fee is 25% of the amount borrowed, and the short repayment period of only a few weeks means that APR figures can easily reach into the thousands if not higher. Combine this with the habit of renewing your loan every month, and it’s easy to see how the situation can deteriorate quickly.

Is there an alternative? Credit card cash advances are generally thought of as being highly expensive, but they’re a bargain when compared to payday loans, letting you spread the cost of borrowing rather than paying the price month after month. A local credit union may be able to advance you a small loan at a much more sensible rate than the payday outfits. Your bank may be able to arrange an overdraft. Your employer may be willing to advance a portion of your next salary, interest free. Friends or relatives may be able to help. If you’re religious, your community may operate an emergency assistance program for people who qualify.

There are many, many options you can explore, most of which will be cheaper in the long run.

That’s not to say that you should never take out a payday loan - they can be useful if used wisely, but can be an expensive addiction waiting to entrap the unwary.

Follow any responses to this post through the RSS 2.0 feed. You can leave a response, or trackback from your own site.