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Payday loans provide opportunities for people to get their hands on some cash quick should they find themselves in a pinch. However, despite the fact that some online payday loan websites offer better rates than physical payday loan outposts and borrowing via the internet makes it easy to compare rates across several different companies payday loans, overall, are the most expensive way to borrow money.

"Calculated as an APR, their costs are higher than any credit card, consumer loan or bank loan," says Eli Lehrer, Vice President of the Heartland Institute, according to the Daily Finance.

Proceed With Caution

If you are determined to pursue a payday loan, experts make the following recommendations:

  • Calculate, as best you can, the actual amount taking out a payday loan will cost you. The arrangement of fees varies from company to company, and just knowing the upfront fee amount and interest rate does not necessarily mean that you know the whole story. The number you should be concerned with is the totally amount of money you will have to repay.
  • Compare the rates, fees and offering of several different two payday loan companies before choosing one to go with.
  • Research and verify the domain of the website offering payday loan services before filling out any online forms. Make sure that you are providing personal information to only reputable companies with secure sites.
  • Think twice before using any service that has contacted you via unsolicited emails.
  • Prior to borrowing a single penny, establish a realistic payback strategy. The best way to handle the repayment of a payday loan is to pay back the money as quickly as possible because interest accrues at an alarming rate. If you anticipating needing several pay cycles to repay the loan, base your cost comparisons upon the entire life of the loan.

Consider Alternative Options

If you find yourself with no cash, no room on your credit cards and none of your friends or family are able to help you out, there may yet be other options rather than taking out a payday loan.

  • Approach your boss and explain your situation. Perhaps you could borrow against a later paycheck.
  • Look into borrowing from a credit union. Some credit unions offer loans similar to payday loans but they are significantly less risky and expensive.
  • Investigate peer-lending services online.
  • Attempt to negotiate with whomever you owe money to. "Many types of 'emergency' costs that lead people to take out payday loans, such as medical bills, can also be paid over time through an agreement with the provider," Lehrer said to the Daily Finance.