By Randy San Nicolas
March 5, 2008

So you are in a touch spot. The car payment is due and you had to spend the money on an unforeseen expense. You just received your first notice from the bank and you can’t make payment on time. What do you do? You can ignore the bill and start thinking about taking the bus to work, borrow the money from your friends or family, or you can take advantage of an unsecured short-term loan commonly referred to as a Payday Loan.

A Payday Loan is a financial instrument secured against your next paycheck so getting approved is not that difficult. If you are 18 years of age, have an active checking account, and been employed for more than two months you are likely to get approved. Additionally, most lenders will only approve your loan request if you do not have any outstanding obligations with other Payday Loan Companies.

There is a potential downside to taking advantage of this somewhat easy method of getting emergency cash.  If you are not disciplined enough to manage your finances and to pay back the loan on your next payday, you could find yourself in a vicious cycle of borrowing from Peter to pay Paul. If this happens, not only will you have trouble making the next car payment, you could fall behind with everything else.

Should you get a Payday Loan? Before making the decision, consider the following:

• A Payday Loan is not meant to be a long term financial solution. Exercise sound personal financial practices and live within your means. Use a Payday Loan only for those unforeseen and critical expenses. DO NOT BORROW MONEY TO BUY THAT NEW TV YOU’VE BEEN WANTING!
• Make sure to prepare for the payback. Remember, because the note is guaranteed against your next paycheck you’ll need to plan on how to make up the shortage until your following payday. We suggest cutting all necessary spending until the Payday Loan is paid back. Also, look for ways to work overtime so you can increase your next paycheck amount.
• If you can’t payback the entire Payday Loan on your next paycheck, be sure to pay down as much as possible. The interest rates on Payday Loans will hurt you IF you do not make timely payments.

If you are still on the fence and not sure if you should borrow, keep in mind a Payday Loan is a good thing to have around when you need it. So borrow if you are disciplined enough to manage the payback period. If you can’t you’re better off asking you mom to lend you the money.

Randy San Nicolas is the managing partner of Launchpad Marketing, LLC and owner of www.fastmoneyfinder.com and www.ultimatecashfinder.com. The sites provide consumers with a payday loan matching making service designed to connect lender and borrower.