Payday loans, when used sparingly and in true emergencies, can be financial lifesavers. A payday loan is funds borrowed from a lender with a promise of repayment, usually from the borrower’s next paycheck. Hence, the name payday loan.

With a payday loan, there are no credit checks, no up-front costs, no sharing your financial information with others and you get the funds within 24 hours. Those are distinct advantages in a crisis. If your car won’t run or it’s the middle of winter and your furnace breaks down for the last time, payday loans can fill an urgent need especially for those whose credit would preclude short-term bank loans.

Finding a payday loan isn’t hard; it seems they’re on nearly every major street corner these days and they’re worldwide. They have longer hours than banks and credit unions and they also cash checks for a small fee.

However, what if payday comes and you’re unable to pay back the loan in full? Payday loans will roll over to the next paycheck and the next and the next—each time adding interest which averages $15 per hundred. Therefore, if you’ve borrowed three hundred dollars for the cheapest water heater you could find but can’t pay the loan back for two months, that water heater has cost you the original price plus 4 cycles of interest. You’ve paid $180 in interest, over half of the amount of the loan!

There are definitely advantages to payday loans if you can meet the original terms of service and get the loan on a truly “payday” basis. However, if you have any doubt that you can pay back the payday lender, you should consider other sources for loans. Better yet, try to plan and provide for financial disasters before they occur.

You can use the little calculator below to calculate your interest rate over a longer period.

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