$500 or a $1500 Loan: Are Bigger Payday Loans Better?
Contrary to popular belief, most recipients of a payday loan are young, educated, employed people who are trying to take advantage of an opportunity or paying off a one time, unexpected expense, not the irresponsible, financially stunted person society might have you believe. When one compares the convenience and timing of payday loans to other types of loans, there is simply no question: Payday loans are a viable and completely necessary financial vehicle. If used responsibly, a payday loan can bolster one's financial situation.
Let's look at the facts, not the rumors: Is it better to go with a $500 or a $1500 payday loan? Is there ever too much cash right now?
The first issue is the fees. Any payday loan borrower should check to see if the bank fees are flat no matter how much is borrowed, or if the fees are a percentage contingent upon how much is borrowed. Research your lender and find one with flat payday loan fees. That way, taking $1500 is actually advantageous.
The second issue: interest rates. As previously noted, most recipients of payday loans are educated and gainfully employed, meaning that they can pay the loan back with the very next paycheck. Barring only a few situations, this is exactly how payday loans should be used; if it is, the actual money paid as interest becomes negligible. Also, if there is an investment opportunity which can pay back or exceed the interest rate over the long term, the obvious choice is to take the amount of money which will allow the opportunity to cash in.
An example: If your interest rate is 10% and you pay it back in 5 weeks, but you can make 6% back over 10 weeks, the $1500 payday loan makes sense. Do the math!
Issue three: The alternatives. There is always the choice to wait instead of taking a payday loan, by postdating a check and hoping it will be accepted, trying to negotiate with creditors for more time, or using another type of credit. The problem occurs when creditors are unwilling to work with you, which most won't be if they sense you're in a pinch. (People only give to folks who don't need it.) Using another type of credit usually means the debt will languish unpaid, as the debtor incurs fees slowly which don't seem like much, but sometimes add up to more than a payday loan simply because of the time taken to pay it back.
Your overall solution: Cash now is always good -- it's what we do with that cash that gets us in trouble. If used responsibly, payday loans can help you stay out of financial trouble, as well as take advantage of immediate opportunities. With the proper financial discretion, you can take the larger payday loan and come out on top. Good luck with your finances!