Can I use payday loans to pay off credit cards?
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UPDATED: Jul 23, 2012
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Payday loans can be used for anything, including paying off credit card debt.
A payday loan is a loan that is lent out to a borrower with the stipulation that a borrower will pay high but short-term interest on the loan. Instant loans typically require borrowers to leave a signed check with a future date on the check to be cashed by the payday lender in order to cover the cost of the loan. These loans almost always have high interest rates to match their short durations which last an average of just a few weeks to one full month. In general, instant loans are typically desired by borrowers who have bad credit histories and limited borrowing options.
Ironically, credit cards are often the reason why borrowers have such limited borrowing options. Credit cards are prone to abuse, especially by inexperienced borrowers. High interest rates on certain credit cards can also lead to higher balances than many borrowers can manage.
Consequently, holders of credit card debt may be tempted to use payday loans to pay off their credit card balances. By looking for a quote before borrowing a cash loan, prospective borrowers can avoid high interest rates.
Since payday loans typically only award borrowers with amounts ranging from $100 to $1,000, a debtor’s credit card balance mustn’t be that high.
But even if one’s credit balance is low enough to pay down with a cash advance loan, using these tools to pay off credit cards isn’t always a great idea.
Instant loans will almost invariably cost more than credit card fees due to their high interest rates and ability to “rollover.” A rollover is when a payday loan borrower misses a payment so the payday loan is carried over for another month along with additional fees and charges that ultimately raise the amount a borrower owes.
Credit card holders who feel desperate and want to pay off their credit card balance may be better off asking for a loan from friends and family, an advance on wages from their employer, or a small personal loan from a financial institution. By moving their balance to a financial institution with lower interest rates borrowers can lower the amount they will owe each month.