In addition, pay day loans are for emergency purposes, for expenses that crop up before you receive your paycheck for the month. Because the amount that you can borrow is not that substantial, pay day loans should be used for expenditures that will need your financial attention for an extended period of time.



The rationale of pay day loans is simple: you need to pay back the amount you've borrowed on your next payday. It's easy enough to understand and it does not need further explanation.

However, perhaps due to today's trying times, some people use pay day loans far longer than it's supposed to be. They keep in renewing their loans. When this is the case, they fail to realize that they will be incurring enormous finance charges and the interest rates could skyrocket to as high as 4 figures (e.g. 1000% in APR)!

Let the Statistics Speak

When this happens, you feel like there's no way out. If you say that you'll only avail of on payday loan and not come back to your lender after completely paying it off, then try to ponder on this. One of the payday loan lenders in Colorado, for instance, estimates that among their customers, only 2% of them take one loan.

Now this may come as shocking news because pay day loans are supposed to be availed of for expenses that do not meet your monthly budgetary requirements. If you have to be realistic about it, this means that if you are able to properly budget -- and of course, lived within your means -- then you should not have been confronted with a need to make a pay day loan often. But of course, emergencies crop up from time to time. However, if they sprout like mushrooms on a regular basis, then perhaps you should not label them as an emergency and you need to adjust your budget accordingly this time.

Further, a Wall Street analyst reveals that on the average, a pay day loan costumer makes 11 transactions annually. This is like making a pay day advance every month! Surely, there is something wrong with the way an average customer handles his or her money!

Getting into a Debt Cycle

This is a question more about habit and than about budgeting skills. If customers avails of pay day loans 11 times out of 12 payrolls in a year (supposing that paychecks are given only once a month), then individuals have grown dependent on this financial option. Perhaps, it started out as a sincere need of money, and then seeing that getting a pay day loan is fast, the person avails of another, then another, then another. In short, the customer has been living in debt.

When you are in this deep hole of financial dependency, then the nearest thing that you'd get to is a debt cycle. It will be hard to get out of it as your coming paychecks are already spent.

Pay day loans should be used for the mere purpose that they are made available to the public. They should not be used as a means of fuelling an impossible lifestyle. Otherwise, you are just getting yourself into more trouble, rather than financial independence.

Money Loans Company - Payday Loans and Cash Advance

20 Eglinton Ave. East

Toronto, Ontario, Canada

M4P 1A9