We have all been there. It is near the end of the month, just before payday, and there is little spare money in the bank. All of a sudden, an unexpected credit card invoice, with ‘final demand’ stamped across it in big red letters, appears. This is a major problem, because, as the financial crisis is showing, banks and credit card companies do not care about your financial situation in the slightest, and are waiting for you to default on that payment.

Many companies, in the small print of the agreement that you signed when ordering your credit card, insert a clause that allows them to charge an extortionate rate of interest if you miss even a single payment. The promises of low percentage APR interest rates suddenly disappear, to be replaced by a rate that would make a loan shark blush. Your monthly budget has to stretch further, and you end up just treading water and paying off the interest, without actually reducing the size of the debt.

This is where payday loans come into their own, allowing you to unlock money quickly and easily, making the payment before you undergo the penalties. The idea behind a payday loan is that you visit a payday loan provider and write a post-dated cheque. They will cash this, after you have been paid and the money has cleared into your bank account. This short-term advance unlocks your money immediately, and stops you incurring any extra penalty or inconvenience. At the end of the day, your problem is not shortage of money, but a temporary cash flow problem, which can strike anybody, irregardless of how much or how little you earn.

The payday loan provider makes a small service charge, as you would expect, but this is a fraction of the huge debt load that will remain as a millstone around your neck for many, many years. Compare this with missing a mortgage payment, credit card payment, or loan repayment, and the extra charges that will be levied. Late payments also court the risk of you appearing on a credit blacklist, unable to buy anything on credit should you need to in the future. Potentially, missing a single credit card payment could prevent you from getting a mortgage, or leave you paying a higher rate.

Even if the idea of a payday loan does not apply to you at the moment, it is a useful service to keep in mind, because the financial uncertainty in the economy is forcing everybody to tighten their belt. All it takes is for an increase in mortgage rates, or a sharp increase in the price of fuel, and your careful budgeting falls apart. This means that they money has to stretch further and you have less of a financial cushion if the unexpected happens.

Once you start descending into the cycle of debt, it can be very difficult to get off, and a payday loan can put the brakes on the process before it gets out of hand.

by Julie-Ann Amos, professional writer, and owner of international writing agency www.ExquisiteWriting.com

Why not create your own HubPages? It's fun and you can make revenue from Adsense and other revenue streams on your pages. JOIN HUBPAGES NOW - SIMPLY CLICK HERE...

This work is licenced under the Creative Commons Attribution-Non-Commercial-No Derivative Works 3.0 Unported License. To view a copy of this licence, visit http://creativecommons.org/licenses/by-nc-nd/3.0/ or send a letter to CreativeCommons, 171 Second Street, Suite 300, San Francisco, California94105, USA.