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Many people today are going through tough financial times. The reasons can vary, but they typically include an unexpected job loss, a sudden illness or medical expense or even a divorce. The financial difficulties that ensue can also cause quick actions - for example, getting a payday loan for bad credit management - but these are not necessarily the right decisions.

The two most common knee-jerk decisions when it comes to handling mounting debts are to either take out a payday loan to handle a specific emergency, or to declare bankruptcy. But by doing either, there can be serious and costly repercussions. In fact, to avoid declaring bankruptcy is the most desirable thing.

In truth, both options can serve a useful purpose, but all too often applicants in tight financial situations rush in without taking a look at the available alternatives. So what are the advantages and disadvantages of these choices?

Disadvantages Of Payday Loans

There are a few disadvantages to choosing to get a payday loan for bad credit management or financial emergency purposes. But the most obvious one is the interest rate, which can be excessively high - in some cases 35%. The result is that to repay the loan is extremely expensive.

Another disadvantage is that the size of the payday loans is very limited. They start as low as $100, but most lenders offer maximum loans of $1,500. This is fine for dealing with specific emergencies, but if a larger sum is needed, then an alternative loan source is needed.

A third disadvantage is the extremely short term, with 30 days the average. Coupled with the extremely high interest rate, this means a loan of $1,500 will require $1,950 to clear within a month. What is more, the payment is made in one go and is taken from an upcoming paycheck. This places extreme pressure on the borrower, so much so, avoiding declaring bankruptcy becomes even harder.