A payday loan is a short term loan designed to help borrowers make it to the next payday. If you take out one of these loans from a payday loan company you will need to pay it back in a short amount of time, usually on the date of your next paycheck. Payday loan critics argue that it is practically impossible to get out from under them because these loans often carry an annual percentage rate of over 400 percent, but it might be a good idea to take out one of these loans if your circumstances call for it.

1. No Alternatives

Consider all of your alternatives before deciding to take out a payday loan. Ask close friends or family members if you can borrow the money from them until your next payday. If you don’t want to ask someone close to you for money, check to see if you have any funds available on your credit cards for a cash advance. Even with cash advance fees credit cards are usually a less expensive way to get cash just as quickly as payday loans. You could even look at pawning or selling expensive items that you don’t need right now. If none of these alternatives are available to you, consider a payday loan.

2. Less Expensive Fees

If you are considering taking out a payday loan to pay a bill so it won’t be late, consider the amounts of both fees. Also make sure you take into account any reconnect fees for bills like your phone or utilities if they are in danger of being disconnected. If the fees for the payday loan are less than the fees you would incur for the late bill, taking out the payday loan for a short time might be a good idea.

3. Keeping Your Insurance

Insurance is there so you won’t have to incur large expenses if something happens. It may be tempting to let your insurance cancel for a short while instead of taking out a payday loan to cover the cost of your policy, but consider where you will be if something does happen while the policy is cancelled. Talk to your insurance agent first and find out if there is any way to postpone your payment or make it for a smaller amount. You might be able to lower the amount of coverage you have for a short while, but if it is going to leave you uncovered you might be better off swallowing the fees for the loan.

4. You Can Pay It Off

The most important thing to look at if you are considering taking out a payday loan is if you can pay it off when your next paycheck arrives. Look closely at your budget, crunch the numbers, and see if it makes sense. If you can’t pay it off when the loan is due the loan company may deposit the checks you wrote to cover the loan, adding insufficient funds fees from your bank to the fees from the loan and opening yourself up to the possibility of more bounced payments.

Payday loans are an expensive way to get money for a short amount of time, but they can be a good idea if it makes financial sense. Look at all of your options and consider all of the associated costs to determine if a payday loan is the best option for you.

Guest author Donald Kyte is a personal finances guru and freelance blogger writing for paydayloan.org.uk.