Is a payday loan a bad idea?

Concerns & risks

Payday is a week away and your rent is due. A payday loan store is down the street.

Payday loans can carry extremely high costs.

Causes & evidence

Short-term loans with high fees can trap borrowers in repeat loans. An emergency fund helps avoid this. See emergency fund.

What to do

1. Ask the creditor for a payment plan.
2. Check credit union small-dollar loans.
3. Ask your employer about paycheck advances.
4. Compare APRs before signing.

Common mistakes: Common mistakes: rolling over the loan again and again. Payday loans can carry very high costs. Consider alternatives like asking the landlord for an extension, credit union small loans, or local assistance programs. Read every fee before signing. If you're in a pinch, call a local 211 line to find emergency help with rent, utilities or food. Many utilities and landlords will arrange a short payment plan if you ask before the due date. Building even a small emergency fund later can keep you away from these loans next time.

Speed Man tip: Look at total cost, not just the fee.

Wrap-up: Payday loans can be costly. Look for alternatives. Compare total cost.