When you take out a payday loan, your lender will give you cash. This cash can be used however you want, which means that you can use it to pay a deposit on an apartment, for a utility company or for whatever else you need.
So, the short answer is YES, you can use a payday loan to pay a deposit. But, just because you can do something does not mean that you should.
The Problem With Payday Loans
The problem with payday loans is that they have extremely high effective interest. Your lender will generally not charge an interest rate, but will instead charge the borrower fees. An average fee might be in the range of $15 to $20 per $100 borrowed.
While this might not seem like much, when you calculate the APR, you get an interest rate well over 400 percent. The reason for this is the very short loan term. Most payday loans are designed to be paid back within 10 to 14 days.
This all makes payday loans one of the most expensive and riskiest ways to pay a deposit.
So, the long answer is NO, you should not use a payday loan to pay a deposit. There are better ways to come up with the money that you need.
Better Ways To Pay A Deposit
Most deposits for apartments, utility companies and even cars will be well under $1000. Rather than pay $200 in payday loan fees, why not take a look at some possible options.
Get Rid Of The Clutter In Your Home
If you are like most people, you are sitting on hundreds of dollars worth of clutter. It might be a table that you never use, an appliance that you regret buying or perhaps a video game system that you have lost interest in. Sell it and get the money that you need to pay your deposit.
The simplest way to do this is to use a website like Facebook Marketplace. Quickly and easily sell your clutter with the advantage of a quick messaging system. Facebook Messenger is the real key to selling because it allows buyers and sellers to quickly communicate, much faster than email. Like all marketplaces there will be scammers however, so use caution.
Another option, especially if you have small electronics to sell is to list your goods on eBay. You will be much more likely to get top dollar but there are a few drawbacks. You will have to wait for an auction to end and you will have to bother with shipping. Still, if you have the time, it will generally bring you in the most money.
Be A First Time Plasma Donor
Plasma is the base fluid that is in your blood. Nearly 60 percent of your blood is plasma, so you have a lot of it and it is worth money.
Medical companies can take your plasma and use it to make a number of life saving treatments. It can be used to help everyone from cancer patients to burn victims. Plasma is used for a lot of wonderful things, but these companies are not doing it out of the goodness of their hearts. They sell it for profit, which means that they are also willing to pay you for the plasma that they need.
Giving plasma is not like giving blood. Your body regenerates it quickly and, because your red blood cells are returned to you there are no side effects like lightheaded feelings. Your body regenerates plasma so quickly that you can donate up to twice a week.
What this means for you, as a first time plasma donor, is that you can make up to $1000 in your first month. That will give you plenty of money to pay a deposit.
Tap Into Money You Have Earned
For most people, your salary or wages are held back one to two weeks. This means that your employer probably owes you money that you might be able to tap into to pay your deposit.
Simply ask your employer for an advance on your paycheck and you could have the money that you need. There is not risk for the employer, since you have already earned the money, so all it involves is a bit of paperwork.
For you, there will be no interest, so your finances will recover quicker. You will just be a little short next paycheck.
Borrow From A Parent
Whenever a free loan is available, it is always advisable to take it. That is the great thing about borrowing money from a family member. No interest and no fees.
Just be careful to take the loan seriously so that you do not end up with any hurt feelings. Get everything in writing and pay back the money ASAP. In addition, when you do pay back money, use something with a paper trail instead of cash. You need a record that you repaid the money, just in case memories get fuzzy.
Negotiate Your Deposit Amount
One last option is to simply negotiate how much your deposit will be.
For some deposits, such as an auto loan, you may be able to eliminate the deposit entirely. While dealers like to have deposits, zero down auto loans are fairly common, as long as you have decent credit. Just be aware that you will likely have negative equity in the loan for a bit longer.
Another option is to negotiate a deposit split. If you need $800 for a deposit, for example, offer to split it up into 4 equal payments. Then, just make $200 payments until the deposit is paid in full. While not all companies or creditors will accept this arrangement, you might be pleasantly surprised.
The Final Word On Paying Deposits
So to sum it all up, YES you can use a payday loan to pay a deposit, but it is not a good idea. The loans are too costly and are due to be repaid too quickly. You could be setting yourself up for financial disaster, and since there are other options, it is not necessary.
Before you make a risky move like taking out a payday loan, look into all of your other options and be creative.