Emergency Cash Without a Credit Card

Apparently, online payday loans are the new credit card.

This might seem like a bad sign, but perhaps it’s not. Many people look at payday online loans as a non-choice – like the option of last resort. But when viewed as a substitute for credit cards they begin to look like a smart move.

Here’s why:

  • A payday loan is limited in size. You can borrow as little as $100 on up to $1500 (in some states), and the loan is structured for payback in one to four weeks.
  • Online loans are very easy to get. You basically need a job and a bank account. You also do not need to physically go anywhere or fax any documents.
  • Online payday loan interest is accumulated over days or weeks, not years. Media reports on on high interest rates assumes that the borrower will hold the loan for a year or more. That would be dumb; a two to four week loan is what this is about.
  • If your credit is bad, it doesn’t stop the loan. Payday loan lenders really are interested in the fact that you work and earn a regular paycheck. That’s the source of the payback, your next paycheck.

Perhaps the biggest advantage over a credit card is pretty simple. You cannot borrow a big pile of money. A payday loan is just the cash you would need in an emergency (an emergency that will cost less than $1500). And you cannot carry online loans for a very long time. The terms of the loan steer the borrower to an earlier, not later, payoff.

You of course would pay interest and origination fees to get a payday loan. The costs of that have to be weighed against the costs of not taking the loan. If you were to incur late fees on other bills, compare those fees to the payday loan. If you don’t work for a week because you cannot afford to fix the car you need to get there, that’s a cost too. Be very objective in your analysis.

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