Is there still a need for the payday loan in the 2020s?

There are a handful of occasions that occur in life when a payday loan is an option you may want to consider, albeit they are niche circumstances; often there’s a more cost-effective solution to your immediate problem. However, there are some cases where the infamous online payday loan is actually less costly than the alternative finance option.

You don’t want to become trapped in a cycle of payday loan debt, so even if you’re in a situation where it makes sense for you, don’t make it a regular thing and make sure you think carefully before committing. If used unwisely payday loans can make life very difficult, however, there have been sweeping reforms to the laws surrounding payday loans over the last few years that make them a much safer option than they used to be.

Take a look below for a handful of circumstances in which you should take out a payday loan.

1. Cheaper than paying fines or penalties

If you have no choice but to pay a ticket or court costs, for example, it will be cheaper to take out a payday loan. If you don’t pay, it can cause more problems in the long run. Avoiding fines for late payments is important, so paying the money immediately by taking out a loan is the ideal option. Shop around to find decent interest rates, and if you’ve taken a payday loan out with a provider (and paid back on time) call them up to see if you can get a better rate of interest as a return customer, saving money on your loan that can go into paying your fines and/or penalties.

2. Cheaper than losing your utility services

It has been known to be extremely expensive to re-connect your utility services if they’re disconnected from failing to pay bills. Once again, in this case, payday loans are a potential solution. However, this is something that is only going to happen once. If you have constant trouble paying these bills then speak to a charity or find other ways of getting funds from family or friends. If you’re turning to online credit regularly, you aren’t using them wisely. We recommend checking out the debt section of ‘the Money Academy’ for help and advice.

3. Cheaper than having a cheque bounce

In challenging economic times, people can be tempted to write cheques when the cash isn’t in the account yet. For one unfortunate reason or another, there can be a delay in getting the funds where they need to be, but that won’t stop you from receiving fines or overdraft fees on your account. Taking out a loan could be cheaper than dealing with fines from these ‘bounced cheques’. The option to opt for a loan here only makes sense if you’re 100% certain you can pay it back on time, otherwise, you are replacing one debt type for another and can quickly find yourself in a vicious circle. In India having a cheque bounce is a criminal offense that has landed people in jail for several months in the past! Thankfully there are more progressive reforms happening worldwide for paying for something with a cheque which then goes on to bounce (knowingly or otherwise). But best to avoid the potential risk altogether!