Payday loans are sometimes considered when a person is struggling to balance their income and expenditure. More often than not, this is occurs on a month-by-month basis, although some people resort to them to make ends meet if they've had to suddenly lay out money for something they hadn't bargained for – an emergency, for example.



These kinds of loans are usually for smaller amounts than, say, a ‘traditional' loan with borrowings usually less than $2000 or £1000. They can be granted instantly so that they can hit your account the same day in order to meet other financial obligations and the money usually has to be paid back within a month of it being lent. So, in principle, they seem like a good idea for borrowing small amounts of cash over a short period but the reality is they are very expensive and there are probably other alternatives that are available to you.

As an example, if you're only borrowing a couple of hundred pounds each month, the interest you pay on that sum for a payday loan might not seem too extortionate but if you work the interest out over an annual basis, it can add up to a rate well in excess of 1000% ! If you consider that an unsecured loan usually comes with an APR of between approximately 6% and 9% and even most credit cards do not charge an equivalent APR of more than around 17%, then you can see just how costly payday loans are.

The truth is that using a credit card to tie you over for a short period or, better still, taking out an unsecured personal loan is a much better and cheaper option than taking out a payday loan. After all, the excessively high interest rate on a payday loan is possibly what got you into financially difficulties in the first place.

There may be those of you who resort to taking out a payday loan because you have a bad credit rating and are unable to obtain a credit card or unsecured loan but the fact is that nowadays, there are loans and certain types of credit cards that are tailor made for people with bad credit and these still work out far cheaper than a payday loan. Furthermore, if you're a homeowner, you can obtain even cheaper borrowing in the form of a secured loan. Other sources of help include asking your bank for an overdraft or increasing your current overdraft and, if it's only for a small amount and over a short period, perhaps friends and/or family can come to the rescue?

Quite often, the reason behind people taking out a payday loan is because they're struggling to make ends meet when it comes to paying their bills. However, if you know your financial predicament is only temporary, many companies are usually sympathetic to your plight and are willing to let you miss a payment or pay a reduced bill for a short time until your situation has stabilised and, with the other options available to you, alongside some of your own re-adjustments of your income and expenditure, a payday loan should really only be considered as the absolute final option as you could be saving yourself a lot of worry and financial pressure by looking at the alternatives outlined above.