Some people see any debt as bad debt. Debt requires a serious commitment, sometimes more than the person bargained for in the beginning. The commitment is seen in the hard work necessary to repay the debt. Bad debt is classified as financing things that can be consumed as in everyday items like clothes, food, or a vacation. It’s amazing how many people will charge clothing when they already have a closet full of clothes, some of which still have the price tags hanging. Food can become bad debt when you are eating far more than is needed for survival all because you just don’t have the willpower to give up a few minor items or brands to make your financial situation more stable. The bad debt may be buying that expensive race car track for your child who already owns a bedroom full of toys he seldom plays with anyway. Some people make a habit of putting gifts on credit, going so far as to acquire a payday loan to buy the gifts just to please their boss or loved one instead of admitting to themselves that the price of the gift is really not what is most important.

The payday loan can be a good debt if it helps you through a temporary set-back that was unforeseen. It can be a good debt if it helps you increase your credit and you are responsible enough to only use it for this purpose, repaying it before the due date to avoid the trick the loan store can sometimes use to deposit your check before the agreed-upon date as a way to force extra fees on you.

Good debt can appreciate in value and contribute to overall financial health. A house purchase can be a good debt. A student loan can be a good debt only if there is no other alternative to achieving your higher education. A payday loan can help in both instances if you need something you didn’t count on for your new house. If you can’t afford the downpayment, that could be another issue altogether. Taking out a large payday loan may be defeating your purpose of getting ahead by investing in your own home. The loan has to be repaid before you incur more charges than you bargained for, usually with the next paycheck.

Financial success can be reached by paying off debts as quickly as possible, especially bad debts. A payday loan involves a fee that is added to the amount to be repaid. Usually that means $15 to $30 per each $100 borrowed. That’s how the payday loan businesses make their money, by charging fees for their services. The convenience comes at a high cost.

Some matching services provide the lender with the customer. That means the matching service is also making money off your money. Anytime a third party is involved, there must be a way to pay for the third party. So, is a payday loan a good debt or a bad debt? Overall, it’s a bad debt. But as usual, it may depend on the situation and your perspective.