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The Pitfalls Of Payday Loan Services

By: Joshua Unseth-- 2010-02-19 3:00 am --

When you are running low on cash and payday is still on the distant horizon, it can be tempting to take advantage of the services of a payday loan store or website. By signing up with one of them, you can receive an advance on your usual paycheck and have cash in your hand when you desperately need it. Sounds great, right? The fact is, payday loan services can actually trap you in an steadily worsening spiral of debt and can make you fall even further behind with your finances.

Don't Rob Peter To Pay Paul

What did people do before there was such a thing as payday loan services or cash advance stores? They scrimped and saved their money in order to get through tight financial times. As unpleasant as it may sound, sometimes you really do have to bite the bullet and tighten your belt in order to survive until your next payday. Sure, using a payday loan service will put money in your hands right away - but what happens when your actual payday rolls around? Therein lies the rub.

Get Your Paycheck Early - But Pay Dearly For It

One of the biggest problems with payday loan services is that they charge truly exorbitant interest rates for their small loans. Typically, receiving a $100 advance will cost you anywhere from $15 to $25. When payday rolls around, the lender then takes out the $100 that you borrowed, along with the interest fee. Now you're out that extra money, and receive a smaller paycheck than you normally would have.

Don't Get Trapped In A Vicious Cycle

Since your next paycheck will be reduced by the fees that you'll be paying to the payday loan service, you're likelier to fall even deeper into debt. That's why so many people turn around and take out yet another payday advance loan - and the cycle gets worse. In no time flat, you're receiving smaller and smaller paychecks and scrambling to keep up with the interest fees that you owe your various lenders - and you're more in debt than ever.

Be Smart With Your Money

Instead of taking out payday loans and paying the ridiculously high interest rates that go along with them, you should try to squirrel away at least a couple of hundred dollars that you can use for those times when cash flow is tight. Sit tight and wait for your next payday to arrive. In the long run, you'll be better off for doing so.