A payday loan is a short-term borrowing option, end of story. Whilst a month’s worth of high interest may shelter you from temporary financial issues, if this is allowed to continue you could end up making your situation much worse. They operate in a slightly different fashion to more established borrowing options. No doubt you probably will have seen seemingly extortionate APR rates of 2000%. Whilst this isn’t representative of the cost of short term loans (this is usually between 20-25%), the more you borrow and the longer you are dependent on this borrowing, the more debt you’ll create.

Let’s take a quick example. If you borrow ?300 from a payday loans company who charge ?25 for each ?100 borrowed (25%), then you will have to repay ?375 when your next payday comes around. However, if you still don’t have enough money, you might then have to take out another loan or get an extension. If you’re borrowing another ?375, your total repayment for the next month would then be ?468. Your overall charges would therefore amount to ?168.

Obviously this can soon spiral out of control if you start to become reliant on borrowing more to cover your previous debts. As long as you are in control of your finances and know that you can pay off your loan in full the next month without getting into further strife, it can prevent you from getting into worse debt. For instance, if you have Direct Debits or other standing orders that you need to pay but don’t have the ready cash to cover them, your bank charges may actually exceed the interest on a payday loan.

If you are unable to cover the cost of a Direct Debit you will be subject to a wide range of nasty fees. In the first instance you’ll often be charged around ?20 for failure to pay a standing order. Then, this will probably push your bank account into the red, meaning an overdraft fee is likely to be incurred. This could equate to a standard bank charge (often around the ?20 mark) or a daily fee for breeching your overdraft facility, both of which could cost you dearly. You might even find that the recipient of the troublesome Direct Debit may also charge you an adminstrative fee for failing to pay on time.

All of this can add up to a pretty sizeable figure. If you have multiple Direct Debits to pay, it can all multiply horribly leaving you well out of pocket and deeper in debt. Worse still, your credit rating could take a pounding, adding to what is already a bad situation. Therefore in order to avoid situations like this, instant cash payday loans can help you to avert a major financial crisis and allow you to spread your costs over two months.

If, for some reason you’re looking to a quick payday loan as a way of bringing stability back to your finances in the long-term, it might be best to think that over a little. They might be a good way to get out of an unexpected financial fix, but certainly not as an alternative to a traditional loan.