There are many ways to finance unexpected expenses or get through times when you’re running short on cash. The advantages of using Lending Club over credit cards in these situations have been covered quite extensively. Another alternative, the payday loan, is one that we hope you avoid.

A payday loan basically allows you to write a check to yourself for a fee in exchange for cash. Payday loan companies will then hold your check until you have the money to cover it, presumably on your next payday. The payday lender will charge you interest, in the form of a fee, for the convenience of this service.

However, the interest charge by payday loan companies tends to be extremely high. In their report titled Financial Quicksand, The Center For Responsible Lending reports that the interest rate on payday loans generally ranges between 391% to 443% APR!

With such high interest rates, it’s clear that payday loans can quickly become difficult to pay off. Payday loans are marketed as one-time, short-term loans. The high interest rate often forces many borrowers to extend their loans, incurring an additional interest fee. The same report, cited above, states that payday lenders “collect 90 percent of their revenue from borrowers who cannot pay off their loans when due, rather than from one-time users dealing with short-term financial emergencies.”

How much will a payday loan cost you? If you borrowed $1,000 at 391% APR ($15 fee per $100 borrowed every 14 days) and needed 6 months to pay it back, you would be charged $1,800 in interest! If you were to borrow the same $1,000 with a P2P loan from Lending Club, assuming an interest rate of 10% (rates start at 7.45%), not only would you have 3 years to pay it back, but the total interest paid would only be $162 over 3 years.

As you can see, payday loans are one of the most expensive ways to borrow money. If you need to borrow money, even if you think it’s only a short-term need, you might want to avoid payday loans at all costs.

When Thomas Jefferson said, “Never spend your money before you have earned it,” he probably did so in accordance with the traditions of the time. While that prudent advice still remains a desirable ideal today, it is no longer a paradigm cast in stone for our modern era. The fact is financial concepts have evolved, such as with the onset of person-to-person lending. Within reason, it could actually make sense to spend your money before you have it. Let us explore two cases.

1. Borrow when something is self-liquidating

This is the best possible case for borrowing—when you can practically acquire something for “free” because you can pass on your debt payments to somebody else. An excellent example of a self-liquidating transaction which you can enter into using borrowed money is to purchase a commercial property which you can lease to a tenant. Ideally, the rental income you receive should cover your monthly mortgage repayments, property taxes, insurance premium, property maintenance expenses and a surplus amount for you as well.

As long as you break even, it still makes sense to borrow without the left-over surplus because you acquire ownership of said property after you fully pay your mortgage. Unless you erred seriously in the choice of your location, since property values generally appreciate with time, you can realize your profit later when you sell the property.

2. Borrow when something appreciates in value over time

This is the next best case for borrowing, where gratification is delayed a bit but still highly probable. Consider a variation of the above example -- a non-commercial situation where you borrow to purchase something for your own use, like a house for your residence. This is a case where your gains do not come immediately in the form of a subsidy on your mortgage repayments from monthly rent payments.

The benefits take a little more time to earn in the form of your accumulating home equity and appreciating market value. However, the moment your home equity grows, you can leverage it for borrowing purposes, even if you still have an outstanding mortgage on your house. Alternatively, the market value of your house could also appreciate to a level where you could sell it to pay off your outstanding mortgage, recoup your financing costs and gain a tidy profit at the end of the day.

Although my examples have been in the real estate arena, the universe of possibilities is by no means limited to the property market. You can borrow with Lending Club to start a small business, buy a machinery or equipment that you can rent out, and so forth. For as long as your “project” satisfies either of the two above-mentioned categories, your borrowing makes sense.

When looking for ways to reduce expenses, shopping sales is a reasonable way to go. Of course the dilemma often becomes: Given a 50% off sale, do you spend half as much, or buy twice as much? Depending on the type of shopper you are, either one could make sense for you.

If shopping is a hobby (a means of entertainment), or your way to reduce stress, then the sale of a lifetime probably won’t defer your next visit to a later date. If you’re the type of person who likes to go shopping on a regular basis just to see what new products are on the shelves, then you should try to set a needs limit rather than a dollar limit.

When it comes to shopping, the line between needs and wants tends to be blurred. Creating a shopping list before leaving home will likely keep you focused. By sticking to your list, you can purchase everything that you need at a fraction of the regular cost.

If you dread shopping, as I do, then buying as much as possible in one outing will push the next trip further out into the future. You will likely do best with a dollar limit rather than a needs limit. Shopping sales will allow you to get as much for your allocated funds as possible.

You may also be able to save even more by taking advantage of end-of-season sales. While you may not be able to wear the ski parka you buy in March for many months, the savings may justify the deferred use.

As you strive to get ahead financially, philosophical reflection is usually a large part of the process. You must go deeper than the actual dollars and cents and examine your inner psyche to determine the source of your drive to consume. As we’ve said on the Lending Club blog in the past, these exercises are not meant to classify specific habits as good or bad, but rather to help you to accurately clarify your situation.

Facebook, more than any other site, is about your friends and your networks. As a developer for the platform, I've repeatedly thought: “How can I make this activity relevant to my network?” With that in mind, I always want to notify my friends and networks about a particular feature and make them come try it too!

Now that Lending Club is available to Facebook members, person-to-person lending on Facebook is finally possible. "Chip wants to pay off his crazy 18% credit cards; can you chip in $100? You'll get $110 next year, and even better, you'll know you helped him out and you may also earn a seat at his debt-free celebration dinner." Your real friends will even validate the purpose of your loan, and strengthen your desire to live up to it.

Finance and money are traditionally such lonely pursuits. How much we make, how much we have, and how we really feel about that. These matters are so private in our culture. Do you know whether your friends, neighbors and even relatives are rich, or just deeply in debt and living beyond their means?

Is there shame in how we may have gained or lost the money? No! Sharing finances is what has built communities. Banking, retirement, insurance were all once simply family and community obligations. Co-ops and Credit Unions are rocks of stability for their members.

Poor farmers in Bangladesh can open a "telephone service" for their communities for $35, which is just about always paid back to spawn another loan. For such innovation, Grameen Bank won the 2006 Nobel Peace Price. Lending Club has the ability to bring microcredit to Facebook.

The concept of getting out of debt can be a shared goal, rather than a hidden, lonely aspiration. If it were open, it would be more likely to happen quickly. I can be proud that I'm smart enough to know high interest rates are hurting me, and delighted that I'm not too proud to ask for help. Who does the culture of secrecy around money serve? It serves those who currently profit from it.

Web surfing was once a solitary activity - and it will never be again. Finance too, will return to its roots as a fundamentally community activity. And with that sunshine of openness, we'll go a long way toward healing our society.

It probably should not be a surprise that in a country with a federal deficit nearing 9 trillion dollars, the savings rate of the average citizen is also less than zero. While there are many reasons as to why the savings rate is so low, the result is that far too many people are not saving enough.

Savings comes in many forms and means much more than cash in the bank. Investments, retirement accounts, and accumulation of real assets are all additional ways to save. Savings are simply all of the means that people have to hold and preserve value and wealth.

A popular method to help people save is called “pay yourself first.” The idea is that if you consider savings to be one of your regular monthly expenses, then you're more likely to do it each month. Automatic savings plans that deduct money from your paycheck are just one example of this method.

Many people who feel unable to save are weighed down by high-interest credit card payments and other types of consumer debts. Even though the individual purchases that they have made were within their means at the time, cumulatively they become overwhelming. Adding on fees and interest can quickly make this problem unbearable. If the “pay yourself first” method of savings seems impossible in your situation, consider consolidating your high-interest credit cards with a person-to-person loan through Lending Club. The money that you save in interest can be the seed money for your new savings plan.

People struggling to pay their bills each month often have a hard time thinking about savings. They have enough to worry about just trying to keep up with their bills. By thinking about saving, you can break that thought cycle and begin your transition out of debt and into a much better financial situation.