Photo by Stephen Witherden
By Valerie March
Okay, okay–I get it. Payday loans (or cash advance loans) are bad news.
The short-term advances are horrendously expensive. They take advantage of young, poor and undereducated people. They often trap users in an endless cycle of debt by allowing people to borrow money they can’t pay back, thus “flipping” the loan for ever-increasing interest rates, sometimes as much as 800%. They cause much suffering and despair. Payday loans kill pretty flowers and hurt innocent kittens.
Roger that. I concede. I’m waving the white flag.
But hear me out–when you’re desperate, payday loans can provide a relatively attractive alternative by heading off even worse financial woes, especially if you enter with your eyes wide open.
As a semi-professional financial screw-up, I’ve never been particularly vigilant about balancing a checkbook or keeping receipts–I figure my cooking skills, sparkling personality, and kick-ass karaoke version of “Hit Me With Your Best Shot” more than make up for this character flaw.
But, a little more recently than I’d like to admit, I realized I had written a $200 outstanding check with only $100 in my checking account. Savings? Ha. Good one. I also had no credit left on any of my cards for a cash advance, and payday (as well as the nearest plasma bank) seemed a million miles away.
I had four choices:
- Let the check bounce and assume the risk of it being returned, only to rack up fees, credit damage and embarrassment.
- Let the check bounce and pray that my bank would cover it anyway, which means I would incur the $35 fee that my bank assesses and an icky mark on my credit.
- Auction off my kidney. Probably the left one.
- Or I could discretely and easily… take out a payday loan.
I can hear your horrified gasps. Everybody just calm down. Let’s look at this rationally.
A short-term loan would cost me a mere $21 for the $100 I needed to borrow, and it would make its way into my account the next day, thus saving me the credit blemish. (Note: The fees vary for each loan provider and depend on your personal financial status. Be sure to shop around for the lowest rate and don’t hesitate to tell competitors about lower offers to see if they can at least match or beat them.)
See what I’m saying here? Yes–I should have kept a better eye on my balance, I should have kept my credit lines in check, and I should have had savings.
But I didn’t, so when the cash cow runs dry, problem-solving people like me turn to the cash sheep or cash goat (I’ve even been so low before as to look to the cash hamster).
Now, make no mistake: I am not advocating cash advances as a way to live. Routinely getting payday loans is a bad, bad idea… but, when used strategically, they can be a powerful weapon in any financially irresponsible person’s arsenal.
Until I reach the point of fiscal righteousness, I vow to make even the bad decisions in a best possible way and save my kidney for when I really need it–like when the Fender FR-50CE Resonator Sunburst goes on sale.
By day, Valerie March is an assistant editor at a financial publisher that offers investing advisory services. (Yep. Not kidding.) By night, she is an aspiring singer/songwriter. Valerie has been saving, rather unsuccessfully, to buy a new guitar for a long, long time. You can check out her and her music out at www.valeriemarch.com.