Pay day loans are frequently vaunted as a fast solution for a tough cashflow problem, letting you bridge the gap between running out of money and your next wage or salary coming in. Basically, you can borrow a small sum of cash for a short term of a week or so, and pay off the debt next time you get paid.

This form of facility can indeed be quite handy if you've got no money for day to day living expenses, or if you're surprised by an unforeseen charge or expense that you just can't meet when you need to, but are pay day loans always the helpful option they're described as?

To start with, we'll outline the incontestable plus points of payday loans, before looking at the disadvantages, and possible different options you may be able to make use of if you make up your mind a payday loan isn't a good choice for you.

The lending standards for pay day loans are really quite lax, and almost anyone who's employed and has a suitable bank facility will likely have their loan application accepted. This means that even people with terrible credit ratings should be able to make use of a payday loan, even after being rejected for nearly any other form of finance.

They are also simple to arrange, and you can often get the advance in your account quickly. Some lenders can even set up an overnight transfer of the funds straight into your bank the next working day, which is patently very useful when you need money without delay.

Finally, once you've been accepted for your first loan, it's normally a very simple matter to 'roll over' your loan again if you find you need to make use of the facility if money is again short in the future.

There are, however, two large disadvantages to wage advance loans which you seldom read in the advertisements and web sites providing them. Firstly, they're hugely expensive in comparison to other types of borrowing. Because the lending period of the loan is so small, a cost of 20% of the amount you borrow - which is just about standard - will work out to be an eye-wateringly high APR.

The second disadvantage is related to the first: because they're so expensive, you can easily be left lacking money the following month once you've cleared the loan and paid the fee. In this scenario, it's just too easy to refresh your loan again to cover the shortfall, resulting in more fees, and a neverending cycle of debt.

And so, if you resolve that a payday loan isn't a good choice for you, what alternatives do you have? The first one is making use of a credit card, if you have one. While credit cards are usually also fairly pricey sorts of finance, they do allow you to spread the debt over a a period of months rather than needing to be repaid immediately along with a fee.

Most bank accounts now offer an overdraft facility, which can also be used to tide you over a short term lack of money. The interest charged on an agreed overdraft is likely to be less expensive than that of a credit card, but your bank might not extend you the facility. Beware of going ahead and overdrawing without your bank's prior agreement, as the charges they will levy in this case will be high.

If neither of these options is open to you, and you have no other way of getting hold of money such as borrowing off family, then a payday loan may be the easiest choice. Just be certain that you use it properly, and paying attention to the warning it's giving you about the longer term health of your financial life.

Martin writes for a payday loans provider in the UK, and you can read more about the pros and cons of cash advances at his site as well as applying online.

This entry was posted on Monday, September 7th, 2009 at 7:39 am and is filed under Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.