When you are in a financial bind, taking out a payday loan may seem like your only option, but it is best to view this kind of financing as a last resort instead of a first line of defense. Payday loans do have their advantages in certain circumstances, but they should be used carefully and with a great deal of proper planning.

If you are wondering if a payday loan is right for you, the answer is an unequivocal maybe. If that sounds like a dodge, in some ways it is, but in a more important way it should serve as notice that you need to be very careful when using this kind of financial instrument. Here are some times when a payday loan could be a good choice.

The Situation is Temporary and Unforeseen

Despite their bad reputation, payday loans do have their place in the list of financial options. Under certain very specific circumstances a payday loan could actually be a good idea.

A payday loan may be an appropriate choice of it is used to address a financial situation that is both temporary and completely unforeseen. If your previously reliable car broke down out of the blue, for instance, a short term payday loan to get it fixed might be a good idea. But if you are running short of cash due to a loan on a car you cannot really afford, that payday loan is unlikely to solve your problems, and the high interest rate will probably only make things worse.

You Have a Plan for Improving Your Finances

Whether or not it is appropriate in this particular case, a payday loan should never be viewed as a long term solution. Instead you can think of the payday loan as a type of financial Band-Aid®, one that should be applied carefully and removed as soon as the metaphorical scar tissue has begun to form.

You would never place a Band-Aid® on a gaping wound, nor should you use a payday loan to address a systemic case of financial bleeding. If your finances are out of control, you will be back at the payday loan again and again, racking up a wide array of charges and paying mind-bending interest rates for an indeterminate period of time.

You should only consider a payday loan if you already have a plan in place to address the financial shortfall that caused the need in the first place. That forward looking financial plan could include taking on a side hustle you can do in your spare time, cutting your expenses to the bone, giving up a second car, moving to a less expensive part of town or a combination of all of the above. Until you have a plan for controlling your spending or boosting your income, the payday loan you take out today is more likely to be a trap than a saving grace.

Alternative Options Would Be More Costly

Much has been made of the high expenses of payday loans, and many of those criticisms are completely valid. Compared to more traditional kinds of financing, payday loans are incredibly expensive, with interest rates well into the double, and often the triple, digits.

Even so, those high expenses do not necessarily mean that taking out a payday loan may not be your least costly option. Depending on your credit score, your history and your personal finances, you might find that a one time payday loan, paid off quickly, will actually be your least bad option.

The world can look pretty scary when your wallet is empty is payday is still many days away. When you look in your billfold and see nothing but bare cloth, you might think a trip to the payday loan office is your only salvation, but it is important to weigh the options carefully. Now that you know when a payday loan might be appropriate, you can decide for yourself if this kind of last resort financing is really the best option.