Despite the bad rap that they’ve received, payday loans can be a real life saver for those without access to other forms of credit. If you’ve ever been in the situation when you needed cash fast and couldn’t get a standard loan, you know exactly what I’m talking about. Unfortunately, because the industry has some rather rampant abuse issues, this is an option which may not be available much longer.

Payday loans are intended to accomplish one simple thing. They are there to tide you over until you get your check when you run into a genuine emergency. Here are some examples of good and bad reasons for taking out a payday loan:

• Taking out a small payday loan to buy groceries because your kids need to eat may be a good idea.

• Taking out a payday loan because you’re out of beer (or malt liquor, or wine, or your liquor of choice) is a very bad idea.

• Taking out a payday loan to pay for car repairs so you can continue to go to work may be a good idea (assuming public transportation isn’t available).

• Taking out a payday loan so you can get new rims or spinners is a bad idea.

You shouldn’t take out more of a payday loan than you can afford to pay back with your next paycheck without needing to immediately borrow all of the money back again. Too many people get into the trap of borrowing as much as they can, then finding themselves in a bind when they need to pay it back because there’s not enough paycheck left to cover the week’s expenses. They end up borrowing the money again, ending up in a vicious cycle known as reloaning which often keeps people tied up for months at a time, paying exorbitant amount of interest.

Because some people have gotten themselves in over their heads with reloaning, and because some unethical lenders encourage the practice, several states have enacted laws governing the industry. These laws range from forcing lenders to disclose the actual annual interest rates to giving borrowers more liberal repayment options to outright banning payday loans altogether. If you live in an area where payday loans are still legal, make sure you use them carefully.

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