Payday loans are the absolute worst type of loan you can take out.  It’s not just because the loan itself – though triple digit interest rates has a lot to do with it.  It’s also because of the situation that breeds the need for these loans.

You don’t have savings or credit card (otherwise, you wouldn’t be thinking about a payday loan).  You’re pretty much living paycheck to paycheck.  Then, you have an unexpected expense.  Since you don’t have anywhere else to turn for quick cash, you opt for a payday loan.  Naturally, the situation hasn’t improved since you first took out the loan and you can’t afford to repay it, so you pay a fee to have it extended.  Then you do it again.  And again. 

State laws prevent you from rolling the loan over too many times, so you take out another payday loan to repay the first.  Within a few months you owe at least $1,000 in payday loans and fees.

Payday loans and cash advances only make a bad situation worse.  Even legislators who voted on payday loans now regret passing those laws.  In several states, like Georgia, laws are being passed to cap the interest rates on payday loans, keeping them in the double digits, at least.

What can you do when you’re in a bind and need cash fast?  Start by preparing for that type of situation.  If you’re reading this and you’re doing ok financially, start building an emergency fund.  Pay down your credit card balances so you have some available credit.  See this article I wrote for Credit/Debt Management “15 Payday Loan Alternatives” more more ways to deal with a financial bind.