Payday Loans – Let’s Drill Down On This!
Payday loans are not always a great option. Do not be seduced by advertising surrounding you from the television, radio or Internet. Always think about other alternatives first, even when you are desperate for some dollars. A short summary for payday loans would be expensive cash.
Payday loans are regulated by each state, and as such the rules are dependent on that state. Payday loans are short term cash loans, and as such have an average length of approximately 14 days. The standard amount that you can borrow usually falls between $100 to $1000. Payday loans can be labeled as check advance loans, post-dated check loans, cash advance loans, and deferred deposit check loans. Finance companies, check cashers, payday loan stores and other organizations will all make payday loans.
How payday loans normally work: The borrower will write out a personal check in the amount of the borrowed sum plus an additional fee. In return the borrower will receive the wanted amount, minus the fee. Fees can be a fixed amount for the borrowings (eg: $20 for each $100 you borrow), or more usually, a percentage of the check amount.The borrower can redeem the check for cash on their next payday. Alternatively, the borrower can roll the loan over for another 14 days and pay the finance charge again.
To put the expense of payday loans into perspective, you should be aware that these payday loans can cost on average 470% APR (annual interest). Credit cards rarely go over 60% APR. Twelve states of the US prohibit payday loans with three-digit interest rates. These are considered in these states to be usury caps or small loans.
Here is an example of the cost of a payday loan using borrowings of $300. The loan fee is $17.50 per $100. The loan term would be 2 weeks. When the 2 weeks is up you have to pay $352.50 to redeem your check. You can either allow the check to be deposited at the bank or you can pay cash. If you don’t have the funds to do this, then you are up for another $52.50 fee to renew the loan for another 2 weeks. So borrowing $300 for 4 weeks will have cost you $105. If you drew a $300 cash advance from an average credit card, and repaid it within one month, you would not be charged more than $15. Here’s a little on fast payday loans.
To obtain a payday loan you need a reliable income and an open bank account. Unfortunately, a lot of payday lenders do not care whether you can afford to repay the borrowings. If you can’t clear the loan, it will be an uncovered check in your bank account. You will be charged a bounced check fee from both your bank and the lender if you fail to repay the check. This will result in a negative credit rating. You could then potentially lose your bank account and encounter problems opening a new account.
Internet payday loans have become increasingly popular. Applications are made online and the funds are deposited directly into your account. The amount you have borrowed is electronically removed on your next payday. The finance fee will be electronically removed from your account if you extend the payday loan.Consumers can become caught up in repeat borrowing cycles, due to the short terms of repayment and the extremely high borrowing cost. Shockingly, almost 60% of daily loans are loans taken out by a consumer straight after paying out their last loan, or are short term loan renewals.
Still desperate for cash? Perhaps your employer can advance you the money until payday. Otherwise try family and friends. These alternatives are probably free of charges, but you are morally obliged to pay them back straight away. If you have no alternative but to take out a payday loan then you should look around carefully. Here’s one of the better operators and I think is worth checking before you take the plunge. It’s called My PayDay Loan and they’ll lend up to $1,500. Do not borrow any more money than you can pay back on your next payday. After this, you should really try to tuck some money away every pay for the unexpected financial surprises that life deals us.