Getting a Payday Loan? How to Avoid Borrowing a Paycheck Advance

Money problems can make people consider getting payday loans, or borrowing a paycheck advance. Payday loans are small, short-term loans with high interest rates, which makes them a bad idea; here are eight ways to avoid borrowing a paycheck advance.

“When many people get into a financial bind, they go to a payday lending store and borrow a few hundred dollars,” says Ethan Ewing, president of “They plan to repay the loan in a week or two, when they have the money. But they pay a huge price. Payday loans can become a dangerous addiction that can cost hundreds or thousands of dollars a year.”

Below are ways to avoid getting a payday loan. For tips on earning more money, click How to Sell Your Stuff on and eBay 4 CD ‘s. And, read on for Ewing’s advice for getting a payday loan and avoiding borrowing a paycheck advance…

Getting a Payday Loan? How to Avoid Borrowing a Paycheck Advance 

The typical interest fee on a payday loan is $15 on a $100 advance, and most loans must be repaid within two weeks.

1. Understand the true cost of payday loans – and consider a credit card loan instead. Getting a payday loan can cost you an annual interest rate of 400 percent. Over three months, a $300 credit card loan at 16 percent interest would cost $15. A payday loan would cost $270. “It’s not a good idea to rack up credit card charges that you cannot pay off entirely each month, but payday loans are far more costly than other forms of credit,” Ewing says.

2. Plan your spending and set your budget goals. To avoid getting payday loan, create a budget that accounts for all income and expenses. Plan funds for every category, and use self-discipline not to spend more. Setting a budget can be challenging, but it’s the best way to avoid borrowing a paycheck advance!

3. Build an emergency fund. Set aside money for emergency use only – some money saving tips are to brown-bag lunch, avoid extras like coffee or CDs, hold a yard sale, or take on a second job. Put your savings in a simple savings account. Don’t keep a lot of cash around the house, but if you have to, make sure you hide your money well.

4. Avoid payday loan rollovers. If you do borrow a paycheck advance, remember that it can quickly get complicated. Many people “roll over” their loans, borrowing the loan again, rather than repaying it. The Federal Trade Commission has pointed out that the cost of three rollovers on a $100 loan could total $60. If you’re borrowing a payday loan, pay it off immediately.

5. Check into overdraft protection. Many banks offer overdraft protection service that, for a small fee, allows a check or debit to clear even without enough funds in the account. It’s not an ideal way to deal with money problems, but the cost is much lower than getting a payday loan.

6. Borrow from a friend or relative. “If you just need a few dollars to tide you over, ask for an IOU instead of borrowing a paycheck advance. However, an unpaid loan can destroy relationships, so don’t use this option unless you know you can pay it back — and borrow only on a rare occasion,” says Ewing. Put the loan agreement in writing – and read Tips for Lending Money to Friends or Family Members.

7. Talk to the creditor. If a medical care costs are the problem, for instance, ask the doctor about making payment arrangements. Most medical providers will work with patients to pay the bill in a way they can afford. Read 5 Tips for Saving Money on Medical Care for more ideas.

8. Get help – such as debt settlement support. If bills typically are more than you can pay, look into all the options. If necessary, check with a reputable debt settlement firm to help find a way to get debt under control.

“If you find yourself in a tight financial spot, don’t make the problem even more stressful with burdensome interest rates and ongoing debt,” Ewing says. “With careful planning, you can avoid the payday lender — and find financial freedom.”

If you have any thoughts or questions about getting a payday loan, please comment below…

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12 thoughts on “Getting a Payday Loan? How to Avoid Borrowing a Paycheck Advance”

  1. The general consensus seems to be that payday loans are ok providing you are responsible enough to handle the repayment. All I would say is only use a payday loan as a last result, and make sure you don’t borrow outside your means. And certainly don’t pay off the loan with another payday loan. I can see how that can lead to a lot of trouble in a relatively short space of time.

  2. Laurie Pawlik-Kienlen

    Thanks for your suggestions about payday loans, Emily and Andrew. The irony is that people who are responsible with cash may be the least likely to need a payday loan!

  3. Andrew @ Financial Services

    Some of us really cannot do without getting an overnight cash advance now and then. It’s a reality. However, if you’re someone who is pretty responsible with cash, you won’t have a problem with this kind of loan. A payday loan is sort of a last resort and should be used only for emergencies. Don’t borrow more than what you need.

  4. Payday loans are a great resource, but they need to be used responsibly just like a credit card or other traditional loan. Check ‘n Go offers payday loans in many states, and also from the convenience of your own home.

  5. Laurie Pawlik-Kienlen

    Point taken — I agree; a payday loan is better than sitting in the dark. Though where I live, the power goes out fairly regularly in the winter….you quickly learn to live without electricity!

    But if I had my druthers, I’d have the power on.

  6. I really dislike having to use these payday loans, but it is sometimes necessary. I would rather pay the fees than sit in the dark if I don’t pay my power bill!

  7. Laurie Pawlik-Kienlen

    Thanks for your comments…I’ve never borrowed a payday loan, but I’ve always wondered about them!

    I have that “loan shark” mentality about them; I always thought they were big ripoffs. But, I see that they can be a good short-term solution for people with money problems… long as people don’t get addicted to payday loans! That can get expensive fast, I bet.

  8. There is a lot of good information here. Thank you. Payday Loans can we really really options but you have to be disciplined. They can save you overdraft fees (Which banks are doing A LOT of these days) and many other issues.

  9. These loans aren’t for people who have a history of not repaying their loans or who already owe for previous loans. They are for good people who have gotten stuck in a hard place and need some help on a short-term basis.