Payday Loans for Bad Credit: Do they help you or hurt you?

by Tracy Murray-Crouch

When I think about any bad credit loan, it only makes sense to me that it should serve some purpose beyond just adding to your monthly payments. In my mind, a loan should pass this test before you ever sign your name and spend the money:

Is the loan absolutely necessary? What are you going to use the money for? I’d say there are good reasons to borrow money and a lot more bad reasons.

Good reasons: finance a new vehicle (when your old one is no longer worth repairing), finance a home (that fits in your budget), finance your education (because this increases your earning power).

Bad reasons: finance a new car that you don’t need, finance a home you can’t afford, finance auto repairs that should have been covered by an emergency fund you keep in your savings account, finance lunch, finance home electronics, etc etc.

So when it comes to payday loans for bad credit, I’m wondering which of the good reasons for debt would be satisfied? After all, with a payday loan you’re really only getting a few hundred bucks, so what good use can it possibly be put to?

Yes, I realize that most people are using a bad credit payday loan for things like the above-mentioned emergency auto repairs, maybe emergency dental work, school supplies for the kids, etc. But I still say that’s extremely dangerous, no matter how necessary the expense seems to be in the moment. The real danger of using this type of financing in your life is that it it sets a very dangerous precedent. Once you’ve used a payday loan, your brain tells you “that wasn’t so bad” and three weeks later you find yourself in the same corner loan store borrowing another $250 or whatever.

I’ve often wished I could be a fly on the wall in one of these shops just to see how many of the customers are repeat offenders. My instinct and my concern is that it would be a majority.

So if you have no other recourse, and the lights are going to be turned off, or you’re going to lose your job, or some other legitimate emergency comes up that requires you to use a payday loan with bad credit, then I suppose you’ll have to. But promise yourself it’s a one-time occurrence. Take better care of your money, set a little aside for emergencies, and you won’t have to borrow this way anymore.