Can I Use a Payday Loan to Pay my Rent?


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Paychecks come and go as if they never existed, but rent remains stable and is sometimes hard to cover. Sometimes payday loans seem to be the only solution to have the rent paid. I’d need to use a payday loan to cover pay my rent for the last two months, but does it make sense?
– Jacob


The Answer

In general, payday loans are designed with one-time uses in mind, not repeated bills which come due every month. You can use a payday loan to cover auto repairs, repairs to your home, medical bills and so on.

That being said, the question about rent does provide for a useful discussion surrounding the context in which you might take out a payday loan.

Example 1 – No Job and Rent Comes Due

In our first example, let us imagine a hypothetical borrower named Jill. Jill has recently lost her job and has sent out a few applications. She feels hopeful about one of them but has no confirmation that she will be back to work shortly.

Rent comes due. Jill was living paycheck to paycheck and does not have the amount needed to cover it. Understandably, she considers taking out a payday loan so that she will not lose her apartment.

Deciding to be an optimist, she applies for the loan and is approved. She can pay rent and stay in her apartment for another month. Unfortunately, none of her job applications result in a position.

The next month, when the rent comes due, her problem has compounded. Not only does she still not have rent money, but now she now owes back the payday loan plus interest.

With no other recourse, she rolls over the payday loan, accumulating more interest and fees. Meanwhile, she ends up taking out another loan to pay rent. The next month, the cycle repeats, and things get even worse.

Through this example, you can see why a payday loan is not usually an appropriate response to not being able to pay your ongoing bills.

Remember Payday loans cannot compensate for lack of income.

Example 2 – Steady Job, But Paycheck Comes Later

Let’s look at a different example where a payday loan might be appropriate for paying rent. This time, we will consider a hypothetical borrower named Jack who has a steady job.

The HR department at Jack’s office makes a mistake, and everybody’s paychecks are scheduled to be sent out a week late. Unfortunately, Jack’s rent is due during that week, and his landlord is unforgiving.

Jack takes out a payday loan and receives just enough money to pay his rent on time. A few days later, he earns his paycheck from work and is easily able to pay off the loan plus interest.

This situation is a one-off, and Jack has every reason to be confident that he can pay off the loan in time (which he does). It is a perfect example of an appropriate use for a payday loan.

Remember Payday loans can be used responsibly on occasion to help you deal with life’s short-term financial “hiccups.” They are not a solution for long-term financial crises.

Reviewed by: Casey Bond
Date Reviewed: April 17, 2019


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