Should You Get a Payday Loan?

In a perfect world, our salary should cover all our expenses--rent, food, entertainment, even the occasional vacation or shopping spree. But sometimes even the best budgets go wrong. Our car breaks down and needs massive repairs. A family member gets sick. A sofa you've been eyeing for months but thought you never could afford suddenly goes on sale, but you have to pay for it in cash.

In emergencies like this, you need a few extra bucks to tide you over from this month to the next. You know your money's coming, but you can't wait for the actual payout schedule. You need the money now, and though you're confident you can pay the loan back soon, you also need the cash right away.

This is where payday loans come in handy. These are short-term loans. Unlike credit cards or homeowner loans, which you can pay at your own pace or are staggered over several months, you have to return the money (plus interest) by the next payday. In fact, many companies will automatically deduct it from your paycheck.

The advantage of a payday loan is that it has a shorter processing time. You can request a loan in the middle of the week, and receive the money by Monday. Usually the amount is directly deposited to your bank account. A quick trip to your ATM and you're good to go. This is much shorter and more convenient than other loans which may take up to half a month to get final approval.

But you have to pay it back right away, which means some strict budgeting for the next two paydays. You may need to review what you thought was an "essential". That daily coffee break at the overpriced corner café? Brew your own at the office. The cab fares, the round of drinks you have with your friends every Friday? It's the subway for you, and maybe this week, you should tell your buddies that you'll be staying at home to clean your closet. Or, what the heck, invite them over to your house. They can bring the pizza and the beer, and you can make sure that there's plenty of ice in the fridge.

You should also check if your budget can absorb the cost of the loan, because if you can't pay your lender back, you shouldn't borrow at all. And what is the purpose of borrowing money in the first place? If it's a leaking roof, then by all means, it's important. Damage to the property can cost more money in the long run (think of everything you'll have to replace!), and the longer you wait, the bigger the repair fees will be. But if you're just getting it to buy a PlayStation 3, then sit out the impulse. You can sit out the next few weeks when the money comes in. It won't kill you to use your PlayStation 2 for a little longer.