It seems that there are more and more advertisements for payday loans on the radio, Internet and television. Payday loans are short-term loans that are not usually for a large amount of money. These loans are usually used to pay bills, or any unexpected expenses that come up in between paydays. When a person gets a payday loan, they will write a personal check to the lender for the amount they want to borrow, plus the fee they pay for borrowing. The company will then hold the check until the loan is due, which is usually the borrower’s next payday. Once it is time for the debt to be repaid, the lender will cash the check. Most people will only use a payday loan when they are in a tight spot, and just need a bit of cash before payday comes along.
One of the reasons people get payday loans is because they are in a tight spot and have a bill or unexpected expense when they are low on money in between paydays. Usually, the loans are for about two weeks or so, and usually only for a few hundred dollars. Although payday loans can be very helpful, they can end up costing you more money than you actually borrow. You could pay an annual percentage rate that could add up to over one hundred percent. The APR can depend on a number of things. It depends on the amount you borrow, the length of the loan, and the interest rate/credit costs that you are being charged. So, when borrowing money, make sure that your next paycheck will be able to cover the payday loan.
If the time comes for you to pay the payday loan, and you are not able to, there are solutions. You can roll the loan over, and you do not have to pay the loan amount until the next due date, but the fees, like interest rate and APR, will still be charged. So let’s say you take out a $100 loan, and the fee is $15. This means on the first loan due date, you would have to pay $115. If you roll the loan over for another few weeks, you would then owe $130, and the cycle would continue. You could end up paying hundreds of dollars for a quick loan that was only for $100.
Payday loans can be a very good short-term solution, but they should not be used often. You are paying an extremely high rate of interest when you get a payday loan, which means that your expenses are just increasing, rather than finding a solution to the money problem. You can also get in trouble with other financial establishments. If the check that you write to the payday loan company that does not go through, you could get an overdraft charge from your bank. You may have trouble getting a loan in the future that could be used for a home or a car due to these overdraft charges. You could also have a collection agency come after you, which will make you have a bad credit score. Unless you know you can pay back the loan, and you do not use the payday loans a lot, they can be very helpful in getting you out of a tight spot.
If you are thinking about getting a payday loan, you should look at all the alternatives, especially if your finical troubles will not be covered by the one loan by itself. You can get a long-term loan from the bank, you could get a part-time job for extra money if you have the time, keep one credit card for emergency purposes, and look into overdraft protection plans in your checking account.
Payday loans can help people get out of a tight spot in between paydays, as well as be less expensive than overdraft feels from the bank. However, they are not recommended for long-term solutions, and they should not be used very often because then you will end up paying more than the loan is worth. Make sure to explore all of your options before pursuing a payday loan.