Finance Menu
Banking
Bankruptcy
Career/Work
Education
Family/Home
Insurance
Investing
Loans
Real Estate
Retirement
Taxes
Articles
Resources
Reviews
Sitemap
Videos
About Payday Loans
You can’t go far these days without seeing a Payday Loan offer. Some come in the form of an actual store (often times found in strip malls or in the parking lot of regular malls) while other offers are presented exclusively on the Internet. But what exactly is a payday loan?
A payday loan is normally a very small loan (under $1,000). Unlike regular
loans, payday loans rarely require a credit check. The terms on payday
loans are much shorter than other loans and the borrower is usually required
to pay back the loan in full within anywhere from two weeks to two months.
Payday loans are marketed as a way to get fast cash to hold the borrower
over until their next paycheck.
When a borrower applies for a payday loan they are required to present
the lender with either a post-dated check or permission to debit their
bank account on an agreed upon future date.
If you do find yourself in an emergency situation where you need to use
the services of a payday loan company, then it is absolutely imperative
that you repay your payday loan as soon as possible. If you’re unable
to repay your loan at the end of the agreed upon term, you’ll be
charged hefty fees in addition to the initial finance charge. Payday loans
are much more expensive than other borrowing options. The average APR
(annual percentage rate) on a payday loan is somewhere around 400%, however,
it’s often as high as 5000%! If you have a credit card with available
credit, you are almost always better off taking a cash advance from your
card, as opposed to getting a payday loan. Even the highest credit card
APR out there isn’t nearly as high as most payday loan rates.
Now that you’re aware of the potential pitfalls of payday loans,
you can decide whether or not it is the type of loan product that fits
your needs. Payday loans can be beneficial if you’re in need of
fast cash in a pinch; however, be prepared to pay the price!
Subscribe to "Your Finances."
Our monthly personal finance newsletter, helping you with your finances.
Don't worry--your email address is totally secure.
I promise to use it only to send you "Your
Finances."