Same Day Payday Loans: Pros and Cons

Same day payday loans are surrounded by controversy. On the one hand, they are high interest and many people get into debt using them. On the other hand, when you have a financial emergency and need cash now a lot of people have no alternatives. The arguments for both sides go deeper than this though, and we'll briefly explore the pros and cons of same day payday loans here.

The Advantages of Payday Loans

Or, better put, what same day payday loans are meant to be used for. Most loans from a traditional banking service are for relatively large amounts of money. Payday loans are typically between $100 and $1,500, which means these loans fill a gap in the loan industry. Most people don't want to obtain a $5,000 loan when they only need $150. Also, while typical loans are geared towards people with high credit ratings, payday loans are basically available for all. They allow you to get cash quickly, often the same day, and when you're having a financial emergency time is extremely important.

The high interest rates are not meant to be compared with those from a bank, banks APRs are by definition accumulated on a relatively large loan over the course of a year, instead, the payday rates are supposed to be paid back within 30 days (at the time of your next paycheck) and are competitive to what you'd pay for a late fee on a credit card bill, or overdraft fees at the bank. If you have an automatic payment coming out of your account two days from now, and you don't have the money in your account, it might be favorable to pay $15 to a payday loan company rather than $60 in overdraft fees to the bank. Similar situations include needing tires for your car, where the penalty could be losing your job if you can't get to work, or over budgeting for the month and not being able to afford food.

When you need cash now for a financial emergency where the consequences would be greater than that of the payday loan fees, this can seem like a great option.

The Bad Side to Payday Loans

Because these loans are for smaller amounts of money, they're targeted towards those with lower incomes, who are more likely to have a hard time paying the money back. And because these loans are meant for use in emergencies, when people are desperate for cash now, they feel to many people to be predatory, with poor people the prey.

You can say the exact same things about the fact that these loans are MUCH easier for people with bad credit to obtain. If you've had a hard time paying things back in the past, why should you be borrowing more money now?

The interest rates are astronomical. Over the course of a year, we're talking about APRs of 500% into the thousands. If you can't pay the loan back on time, the late fees just keep building up and as is often the case, you end up owing more on the payday loan than you originally borrowed. While credit cards have been known for their notoriously high interest rates and have been said to be the fastest way to get into debt, payday loans have quickly taken their place.

So, if I'm having a financial crisis, should I get a same day payday loan?

I'm saying think about your situation carefully. I don't take the side that payday loans are never the answer, and I don't take the side that they are always the answer. You need to consider everything above about both sides, and then evaluate what your other options are and if this will solve your financial problems. Carefully consider whether the fees are worth it to you, and go over your budget to be sure that you will be able to pay the loan back with your next paycheck-you do not want to pay late fees or roll your loan over for another pay period.

Same day payday loans can be a great financial tool, or turn into something you'll be dealing with for years to come. Always use responsibly.