Payday loans are becoming increasingly prevalent. Perhaps because so many people have found themselves in difficult financial situations during tough times, they have come to be seen by many as a means of obtaining cash in a pinch. While they can be a valuable resource when you have a genuine emergency and lack other options, they can run you into a vicious cycle of borrowing and paying the money back, only to have to borrow it again. It’s easy to get dependent on them.

Don’t be fooled by the interest rates that are advertised. Typical rates are between 9 and 14%, but that’s a straight rate paid back every time you pay the loan back. Without going into excruciating detail about how banks figure interest rates, a typical payday loan charges the equivalent of about 400% interest if you’re comparing apples to apples with a bank loan or credit card. So, before you stop in to that cash advance place, and sign up for a payday loan that will charge you exorbitant interest, look into these other options first:

• Negotiate with your creditors. We know, it can be a pain, but most creditors realize they can’t get blood out of a turnip. If you don’t have the money, or only have part of it, it is what is. In most states, there are laws that protect you as long as you are making some attempt to repay a debt.
• Use a credit card instead. Hopefully, if you have a credit card, this already occurred to you.
• Ask your employer for an advance. The worst he can say is no. And if he’ll do it, at least you won’t have interest to pay back.
• Apply for a traditional loan. It’s slower, and they might say no, but it’s worth trying. Some banks will even work with those with poor or no credit.
• Ask a relative or close friend for a loan. We know, it can be embarrassing and you don’t want to be a burden, but you’d do it for them, right?
• Borrow money from your savings, IRA, 401K or life insurance cash value.

In short, if you can avoid taking a payday loan, avoid it. And if you can’t, pay it back right away.

Photo via Stig Nygaard