Payday Loans Online: A Convenience — or a Trap?

The Internet can be a wonderful tool that allows users to accomplish many tasks without ever leaving home. They can view weekly ads for local grocery stores, check their bank balance, communicate with family members, conduct research for a term paper or handle many other chores that were once possible only in person or over the telephone. They can even obtain a payday loan online. However, the growing popularity of online payday lenders has led some to ask whether this service is a convenience or a trap.

Are Online Payday Loans a Genuine Convenience or a Debt Trap?

There is no question that online payday lenders offer a convenient service. You can apply over the Internet from the comfort of your own home, eliminating the need to drive to a local payday lender’s store. This makes the service much more convenient for those who live in a rural area or other location where a physical storefront might be many miles away.

Unlike a physical store that maintains fixed business hours, you can submit an online loan application 24/7. You do not have to take off work or adjust your schedule to make an in-person appearance at the payday loan store. People with limited mobility, small children at home or transportation issues are spared the challenges they might face if they have to go to a local payday lender’s physical location.

Another point raised by many online borrowers is that they can maintain greater confidentiality. They do not have to worry that co-workers, neighbors or friends might spot them entering or exiting a payday loan store. They believe that this helps them keep their finances more private.

Online payday loans are both fast and convenient. To some critics, they are just a bit too convenient. They feel that when loans are easily obtained, people have a tendency to abuse them, which can leave them trapped in debt. Singling out the online payday loan operators, however, is extremely unfair. The simple truth is that any type of credit that is used unwisely can lead to the same type of debt trap.

Credit Cards can be a More Treacherous Debt Trap than Payday Loans

Dave Ramsey, the well-known author and lecturer specializing in personal finance, asserts that there is no such thing as using a credit card responsibly. He notes that using credit cards virtually always guarantees overspending since people do not have the same feelings when paying with a credit card as they do when paying with cash. Few people, Ramsey notes, immediately pay their credit card bills in full, with the average family owing approximately $8,000 in credit card debt. If they have a good interest rate, never make another charge and make just minimum payments, these families will need between 36 and 48 months to pay off their credit cards.

In the above example, these families will pay between $2,100 and $2,400 in interest charges before they are debt-free. Issuers of credit cards make a lot of money from the interest they charge, which is why they really like for people to always carry a balance. Payday lenders, on the other hand, really like for people to pay off their loans as soon as they are due. However, critics are not calling for sweeping reforms to the credit card industry even though it can be a much more treacherous and insurmountable trap than a payday loan.

Payday Loans are not Debt Traps when Used Responsibly

An excellent article published by the University of Arkansas points out that credit of all types can be either a tool or a trap. When used responsibly, credit — including payday loans — can help you obtain the services or products that you need now while delaying payment. When used unwisely, all types of credit can lead to a “revolving door” of debt and possibly even to bankruptcy.

Payday loans have always been offered as a short-term solution to a temporary cash shortage. In other words, they are intended to meet a financial emergency rather than be used as a form of revolving credit or the solution for borrowers who spend more than they earn.

Before applying for an online payday loan, borrowers need to take an honest look at their financial situation. You should establish a realistic plan to ensure that you will have the funds to repay the loan. Your plan might include some or all of the following.

• Cut expenses and earmark the savings for your loan. For example, temporarily eliminate dining out, recreational expenses or impulse purchases.
• Have a garage sale and save the proceeds to pay your loan.
• Sell items you no longer need online through an auction site or local classified ads.
• Take a temporary job on your days off or after your normal working hours.

When used wisely, online payday loans can be a convenient and valuable tool to help you manage your finances. Part of using online payday loans wisely is educating yourself on the topic. You can start learning all about payday loans by reading more articles at

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