Payday loans are designed to be short-term loans that most people use when a financial emergency comes up. In order to save as much money as you can, before you decide to apply for a payday loan (they are very easy to get) you might want to consider what it will cost and what the possible consequences are.
What Are Payday Loans and How Much Can You Borrow?
Payday loans are cash advances that you can get without having your credit checked or putting up any collateral. Your ability to get your loan is based on how much money you earn (or receive from other sources, such as a pension). Most payday loans are paid back out of a person's next paycheck. So most are repaid in about two weeks.
If you can't repay it on time you can roll it over, although you will have to pay additional fees and interest.
Payday loans are usually for between $100 and $1,500. Most are for less than $1,000.
If you go to a payday loan store you will probably write them a check stating the amount you are borrowing plus a fee.
However, if you apply online everything is done electronically. Whatever you borrow will be wired into your bank account within 24 hours. Some payday loan companies can even get you your money within one hour.
What Are Payday Loans Costs?
Payday loans are quite expensive. The interest you will pay for a loan you will have to repay in two weeks usually varies from 10% to 30$, depending on which lender you borrow the money from.
So, if you borrow $300 for two weeks, expect to pay between $30 and $90 in interest. If you add that to the loan amount, you will repay between $330 and $390 for a $300 loan.
If you cannot repay the entire amount you will probably have to pay an additional thirty to ninety dollars to extend your loan.
This is an extremely high percen tage rate. That is why most people only use these loans when they absolutely have no other choice.
What Are The Possible Consequences of Payday Loans?
The biggest problem is that a payday loan really doesn't help solve a long-term financial problem. Also, they can make the problem worse because of the very high interest rates that are charged.
If there is a crisis a payday loan can be very helpful and getting the money may outweigh the risk involved. But you will often be much better off if you take advantage of other alternatives.
What Are Some Payday Loan Alternatives?
If you can, see if you can borrow from a friend or relative, or get an advance from your employer.
Start setting up your own emergency fund plan. It's easier said than done, but if you can put away even ten dollars a week, you will have over $500 for emergencies by the end of a year.
See if you can get a credit card that you will only use for emergencies.
Get a part time job.
Sell things on eBay.
Have a garage sale.
What to Do If You Need a Payday Loan
Because interest rates and fees vary so much, compare rates from as many payday loan companies as you can. This is very easy to do online and you do not have to submit an application in order to find out the interest fees and rates that a payday loan company charges.
Then, if you must get a payday loan, apply to the company that has the lowest rates. If you apply online you will usually find out if you are approved within minutes.
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