Online payday loans are loans that are given to people who need urgent cash but cannot access from traditional lending sources. Traditional cash advance sources include the bank where you process your salary or make regular savings, an usury in the neighborhood or your credit card. The financial institutions will not lend you any more money if your credit rating is poor. This may be a motivation to seek online payday loans.

However, given that online payday loans are usually charged a higher fee or interest and require repayment within a short period, they should not be a preferred mode of bridging financial gaps. The cost benefit analysis of the borrowing from payday loans must be scrutinized well before one settles on borrowing from this rather expensive means. In other words, it is not every excuse that provides good justification for online payday loans. The return on investment must surpass the cost of the investment for this an acceptable justification as described below. We shall review situations that may be justifiable and those that should never be used to borrow from payday loans scheme.

Green lights to online payday loans:
• Borrowing for medical emergency:
There are situations when your insurance cover may not meet some medical bills. This could be due to limitations of the policy or the fact that you are temporarily out of your regular job and therefore do not benefit from a medical insurance cover. If an illness befalls a member of your family, you may be forced to borrow from a payday loan to avoid regretting the rest of your life. These need to be exceptional cases and should not be done to support friends or distance relations.

• Borrowing to exploit a short-term business opportunity:
In cases where you are sure of a good business return and your investment is secured such as in government short term treasury bonds, then you can borrow to take advantage of the opportunity. The two qualifies for this move must be available: a higher return on investment and guaranteed investment.

Red lights to online payday loans:

• Borrowing for holiday:
However much an offer for a cheap and unique holiday is, never borrow from payday loans. This is because the return on investment from a holiday may take too long to be realized.

• Borrowing to repay a debt:
Some people live in perpetual debts, borrowing to repay another debt. This may be counter-productive in the event that the online payday loans have a higher interest than the loan you are repaying. There are many other ways of consolidating your loan and repaying it without increasing the cost. Explore other options with a debt financing advisor and check the benefit of borrowing from payday services.

• Online payday loan to buy a consumable:
Another no and no is that of using online payday loans to buy a consumable such as shoes or clothing that you simply are crazy about. You may end up repaying 2/3 of the debts owned.