In ideal circumstances no one would have to borrow money, least of all for only the time to payday. Life however, has a way of throwing trials at us as though to test us. For example, the car may break down or you may end up with an expensive vet or medical bill. A payday loan may be a tempting prospect to cover these costs, but the best advice is to think twice before you do so. Look at other alternatives including credit cards or an arranged overdraft they may look expensive, but will no doubt be cheaper long term.
Payday loans are amongst one of the highest charging loans it is possible to get. As more and more borrowers are unable to lend money in more traditional ways though more and more people will turn to them. However in almost every circumstance even a product with a generally high interest rate such as a credit card will be better.
Consider some short-term payday loan companies charge what would be an equivalent of between 200 to 900% APR, some have even be found to charge as much as 3,000% APR! This makes even the 20-40% APR charged by your credit card look good in comparison. Considering payday loans are only short term this APR comparison can be a little unfair, regardless they are still an expensive way to borrow money. Even credit building credit cards can offer a much better rate of interest then this.
Payday loans often have a fixed date on which they must be repaid in full, they can often be “rolled” over. This is for yet another fee and another bout of extortionate interest. Credit cards on the other hand are a rolling form of credit providing your pay the minimum amount. This gives you more flexibility in months where money is tight and although they will charge you interest the amount will be much more manageable. You can also spread the cost out longer term without incurring massive charges.
Having and using a credit card can also improve your credit score providing you make the regular minimum amount payments on time, and in full. Each time you do so improves your credit score or rating. Many payday loan companies do not work with credit reference agencies other then when it is time to collect their debts so will never help your credit score. Paying with a credit card also allows you to spend the exact amount required rather than lending blocks of 100, again keeping both the loan and the interest down to a more manageable level.