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PayDay Loans - Be Careful
The Payday loan companies typically target lower income people, younger borrowers with little understanding of finances and consumers that are deeply in debt with ads that say "Fast, Easy, Discreet, and No Credit Check." It is important that as a consumer you are aware of what you could get yourself into. No one can argue that payday loans don't offer a need and payday loans can get you through a financial crisis but, shop carefully and make sure you have a budget that includes paying back this loan and stick with it. You should borrow only as much as you can afford to pay with your next paycheck and still have reserves until the following paycheck. Typically a borrower writes a post dated check payable to the payday lender for the amount they are borrowing plus the fees. The payday lender in return either gives them a check for the amount minus the fee or directly deposits the amount in their checking account. The lender then agrees to hold your check until your next payday for anywhere from 1-4 weeks. On your next payday the lender deposits your check, or you redeem your check with cash or you can roll-over the check and pay a fee to extend the loan again for another 1-4 weeks. If you paid $20 to borrow $100 for two weeks and then rolled it over for two more weeks you would be paying $40 to borrow only $100 and if you rolled it over one more time you would be paying $60 to borrow $100. The downside of this is if you had money problems to begin with and extend the loan month after month you could end up in worse shape than when you started. Many of these companies allow a limited number of roll-overs. Internet payday loans can be hazardous for consumers that have insufficient money on hand. First, there are the high costs and then the collection risks if you do not repay the loan combined with security risks of sending all of your banking information with social security numbers over the web to a company you do not know. If you decide to go ahead an apply for a loan make sure you know what the annual interest rate is and the finance charge before you fill out an application then you can compare different lenders. Be aware that many lenders also automatically renew loans by electronically withdrawing the finance charge from your checking account. If you do not have enough money on deposit the lender and the bank can impose additional fees. There are alternatives and you should always investigate them first. Compare the high interest rates of a payday loan to a small personal loan from a bank. A credit card with a high-interest rate probably has a much lower rate than a payday loan. Try asking your employer for an advance on your paycheck or take a credit card advance. Call your creditors and request additional time to make payments. Look for local credit unions and ask about their small loans. Ask friends or family and put the loan in writing with the interest rate you will pay and when the loan is due and stick to it you may need them again.
Comment on this article:
These payday loan guys are scammers, but I guess if you let yourself get into that situation then you deserver what you get. In the old days there were loan sharks.
If you go with a reputable company and know what you're getting into, they can be a big help when you're in a jam. Just have to make sure you really need it. for example, when it's your last resort.
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