Sometimes when things get a bit tough we do things without too much thought. Usually because we want to put the tough one behind us and continue. This may result in jumping into pay days and regret it later. Payday loans are not so bad as long as you know what you are coming in and you take some time to think about actually doing it and how you will later terminate the loan.
To begin with, payday loans are not always a good choice! Do not be fooled by the ads from the mall, radio, tv or the Internet. Even if you need desperate money for your payday, you should consider all options first. In my opinion, a short definition of payday loans is expensive cash.
Payday loans are short-term cash loans. The amount of money that can be borrowed runs regularly from $ 100 to $ 1,000, and it depends on the laws of each state. Middle Ages is about two weeks. Payday loans are made by checking cash, finance companies, payday loan stores and others. They are also denoted as cash advance loans, check advance loans, deferred deposit check loans or post-dated check loans.
How it works usually: The borrower writes a personal check for the amount borrowed plus a fee and he receives the amount he or she wishes minus the fee. The fees are regularly a percentage of the value of the check, but they can also be a fixed amount charged by certain amount. When the next payday comes, the borrower can redeem the cash check. Otherwise, he can pay the finance fee again and roll the loan for another two weeks.
To get an idea of ??how expensive payday loans are, you must know that this type of loan costs an average of 470% APR (annual interest) while the APR credit card is rarely higher than 60%.
Let's assume you want to make a $ 300 loan, the loan fee is $ 17.50 per $ 100 and the loan period is 14 days. To redeem the check, you must pay $ 352.50 when the 14-day period is over. You can pay by cash or you can allow the check to be placed on the backside. If you still do not have this money, you must pay the $ 52.50 fee to renew the loan for another loan period. That means borrowing $ 300 for a month costs you $ 105. It's not cheap at all! By way of comparison, a $ 300 cash charge on an average credit card, refunded in a month, would not cost you more than $ 15.
All you need to get a payday loan is an open bank account and a steady income source. However, lenders are not necessarily interested in finding out if the borrower can afford to repay the loan. If you do not pay the loan, it will be a unchecked check in your bank account. If you fail to repay it, you will receive a reconciliation check charge from the lender and from the bank. You will get negative ratings on specialized databases and because of this you may lose your bank account and have trouble opening a new one.
Due to the very high cost of borrowing and the short repayment terms, consumers sometimes tend to catch themselves in repeated loan cycles. Reports show that almost 60% of all loans made every day are either loan renewals or loans taken out of the same consumer immediately after paying the last.
Mortgage loans with three-digit interest rates are banned in twelve states in the United States, where they are considered to be small loans or fixed income securities.
Lending on the internet has become very popular lately. You can apply online and borrow directly into your bank account. When the payday comes, the amount of money you have borrowed electronically has been withdrawn. If you choose to renew your payday loan, your financial fee will be automatically withdrawn from your account.
Here's a proposal to avoid getting a payday loan. First and foremost, act carefully! If you really need the money, try to get paid on your employer's salary or borrow money from family or friends, at least you can do it for free usually. Enter your daily and monthly expenses, and try to avoid unnecessary purchases. You should also build some savings so there is no need to borrow money for unexpected expenses or emergencies. If you still decide to use a payday loan, make sure you do not borrow more than you can pay with your next paycheck.