Your daredevil kid breaks an arm, the car overheats and the house roof starts leaking. You need cash right away. Should you consider a payday loan?
Payday loans (sometimes called cash advance or deferred deposit loans) can provide short-term financing to help cover immediate needs. You can usually apply online or at a local storefront.
Here’s how it typically works: You write the lender a post-dated check for the loan amount plus a borrowing fee. The lender hands you a check and agrees to hold your post-dated check until next payday. When payday rolls around, the lender deposits the post-dated check or you extend the loan for an additional fee.
If you apply online, you’ll often be approved in minutes without filling out paperwork. In a few hours or days, loan proceeds will be deposited directly into your bank account.
Are payday loans a good deal?
It depends. Before you apply, consider three disadvantages:
Before an emergency strikes, take time to explore alternatives. Cut back on unnecessary expenses. Ask family and friends for help. Build an emergency fund by working a second job or perhaps selling good-condition items online.
“A general rule of thumb for an emergency fund is 3-6 months of living expenses.” — Rich Middleton, CPA
Bottom line? If you must, use high-interest payday loans as a last resort. Speak with an Alloy Silverstein CPA about your challenges and goals to get a plan in place.
Further Reading:
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