For many people today, money has never been tighter. While the economy and employment are on the way down, the price for gasoline and other basic needs are on the way up. A lot of Americans live from paycheck to paycheck, broke on payday waiting for the next check. The problem with living this way is that if something unexpected happens (and it does occasionally) then you are unable to fix the situation if it requires a financial expenditure. Things like a flat tire, medical expenses, electric bill disconnect notice, and other urgent matters come to mind.

One option people take is to sign up for a payday loan. This is where a company will lend you a lump sum of money (usually at a max of $1000), and you agree to pay them back within a week or two, along with the accrued interest (which can be as much as 25% for the term and even as high as 1000% yearly). If you establish a good track record with them, they will gradually raise your credit limit as you go. Normally, the requirements are a bank account in your name, a verifiable place of employment with direct deposit activated, and legitimate identification. Once you supply them with this proof, they deposit the loan amount into your bank account on the following business day. The repayment is automatically debited from your account on the due date.

This all sounds great doesn’t it? Well, don’t be so sure. These loans are not for everybody, especially not for people that are awful with money and have trouble paying their bills. It is not a coincidence that some of these payday loan companies (not all of them) don’t check credit before approving you for a loan. They actually prefer people with bad credit. Why? Money, that’s why. People with bad credit will likely request one or more extensions on the repayment date. These extensions can be very costly, some of these companies are outright criminals. In some cases, you would be better off going to the mob for a loan. If you don’t think that you’ll be able to pay off the full loan amount plus all interest in the allotted time, then you shouldn’t consider this type of loan to begin with. These extensions can turn into a vicious cycle that quickly spirals out of control. You can find yourself ultimately paying three or four times the amount of the loan itself in interest.

Payday loans can be a quick fix for you when you know for a fact that you will be paying the money back at the first due date. If there is any doubt, then you risk getting caught up in the endless cycle of penalties and interest, always paying the interest and not the balance. This is exactly what some of these companies want you to do, more money in their pocket. You are better off borrowing the money from a friend or relative, or even taking a cash advance on a credit card.

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If you find yourself walking around with a 500 pound gorilla on your back named DEBT, then you might be wondering if there are, in fact, any real options for you. Well the answer to that is: it depends. There is always an “it depends” clause somewhere right? Yeah, but the reason is that your exact situation dictates your options.

Some people have no money, no job, and are in debt up to their eyeballs. This person’s situation is much different than someone that has plenty of money, a good job, but doesn’t pay his bills so he has terrible credit, and now that his credit is shot, he thinks paying his bills is a waste because it won’t improve his situation. Yes, people get themselves into positions like that all the time.

First thing you need to do is create a balance sheet, which is just a two column table with INCOME on the left and EXPENSES on the right. List everything you pay money for on a regular basis. Round up things like food and other consumables, you round up because it is better to overestimate expenses than to overestimate income. If you have extra money after all this every month, then you should use a portion of that money for paying debt. Even if it is just $20.00 a month, it is still something. The important thing is to get into the habit of paying your debts regularly and you’ll be surprised how quickly the time goes.

Instead of paying your debts, you can always declare bankruptcy. There are two classes of bankruptcy, they are Chapter 7 and Chapter 13.  The difference is that Chapter 13 is better and lets you keep certain assets that are exempt from liquidation, provided that you have a steady income. These include assets such as a house (mortgage) and a car, etc. Chapter 7 is much more strict and makes you liquidate nearly everything you own. The federal system encourages people to file Chapter 13 because the economy would be better off in the long run. Filing bankruptcy will stay on your credit report for 10 years, and will make it difficult to get credit. This is why it should be used as a last resort only.

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