Payday loans: when to use them or not?


Life can be unpredictable, especially when it comes to spending. Something as simple as a flat tire or a broken washing machine can quickly blow your budget.

It is for these kinds of urgent and unforeseen expenses that payday loans, also known as cash loans, are often suited.

They are designed to give you access to cash right away, while allowing you to repay the amount in full on the next pay day or partially over multiple pay days. This is where payday loans got their name.

This article examines when it is and is not appropriate to apply for a payday loan.

Payday loan restrictions

There are a number of restrictions on who can and cannot apply for a payday loan. This is because payday lenders are required by law to lend responsibly. Therefore, a payday lender should not lend you if they believe you are not suitable for such a loan.

For example, if your bank statements show a lot of chargebacks or chargebacks, or if you have another small loan active, your loan will most likely be automatically rejected. In addition, if your income comes solely from Centrelink, your request will not be accepted.

When to use a payday loan

Payday loans can technically be used for just about any small expense. As long as you meet the loan criteria outlined above, there are no restrictions on what you can and cannot use for the money.

Having said that, there are certainly some situations that are more suitable for payday loans than others. These situations often include unforeseen or unforeseen expenses.


  • Emergency car repairs
  • Broken home appliances
  • Costs associated with medical care

You will notice that these examples are one-time expenses, not recurring costs. This is an important distinction that we will explore further below.

It should be noted that unlike a credit card, which accumulates compound interest, your payday loan repayments remain the same. This is because cash loans calculate repayment costs using fees rather than compound interest. The benefit of this is that you will know exactly how much is due each week and when.

When not to use a payday loan

Payday loans are designed to cover unforeseen costs while providing a manageable repayment plan.

Ideally, your payday loan repayments should fit into your weekly budget like any other regular payment, like your rent, phone bill, or mortgage.

Therefore, if you plan to repay your payday loan over multiple pay days, you should avoid “doubling down” by using your payday loan to pay for another regular expense.

What do we mean by this?

We mean, don’t use new debt (payday loan) to cover an existing and ongoing financial commitment. These financial commitments can be varied but often include the following.


  • Rent payments
  • Utility bills
  • Membership Fee

If you take out a personal loan to cover these recurring charges, on the next billing date you will have to pay both the upfront payment and the repayment of your personal loan.

This can lead to bills piling up on bills and should be avoided.

Alternatives to a payday loan

If you need an extension for a regular payment, talk to your lender or provider first.

Often, utility providers, such as electricity, gas, or water suppliers, can reschedule your repayments to make up for a temporary cash flow shortage.

Likewise, your bank or lender can help you reschedule your loan if you’re having trouble meeting your repayments on time.

If you are having difficulty honoring an existing payday loan, contact your payday loan provider. Lenders will sometimes allow you to reschedule your payments based on your financial situation.


In conclusion, a small cash loan from a responsible lender can be a convenient and quick way to cover a one-time unexpected expense.

However, before applying, it is important to consider the alternatives and whether there is a potential for “doubling” reimbursement expenses.

About the authors

This article was provided by the team at payday lender, Club Money.

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