Are Payday Loans a Smart Way to Reduce Financial Stress?

It is now possible to get a faxless payday loan through a simple web-based application process. This effectively has made it possible for millions of working Americans to borrow against a future paycheck in order to pay bills that are due before then.

Payday loans have their critics, however. Some say the annualized interest charges (what the borrower would pay if they kept the loan for 12 months) are too high. What that fails to consider is that payday loans are to be treated as short-term stopgaps, a means to get through a financially stressful situation that can be resolved in a few weeks.

In fact, payday loans can reduce financial stress in both the short- and longer-terms. Here are three such ways they answer the question, “Can payday loans reduce financial stress?”

YES: Takes care of this month’s bills. Clearly, getting current bills paid are a first priority in most working households. This is primarily how payday loans are used.

YES: It forces the borrower to budget for next month. Any payday loan borrower needs to think through the payback plan. The shorter the loan is held, the lower the costs. If the borrower is able to restrict future expenses as a means to pay back on the loan, it might help him or her realize which expense items aren’t really necessary.

YES: Payday loans might cost less than late payments. One of the most unnecessary and maddening expenses in life are late fees. Timing is the enemy, and if a payday loan can solve the timing problem, these additional fees and interest charges can be eliminated.

As should be clear, payday loans are good for reducing the psychological burden of unpaid bills. By getting control of the current bill-paying crisis, the borrower can take time to plan for a better-managed financial future.