All About Payday Loans

Payday Loans - The Good, The Bad, The Ugly

Let's just say it right up front. Payday loans are bad. You should never use
one unless it is absolutely, positively your last resort. The interest rate
borders on usury. If you calculate the interest rate, based upon a typical
payday loan fee schedule it calculates out to about a 500% annual interest
rate (APR). In one recent survey of online payday loan providers, the most
common APR offered was 658%! If someone were to offer you a loan at these
rates you'd turn them down for sure! The problem with payday loans is that
the debtor is very vulnerable and has nowhere else to turn. The payday loan
establishment offers an escape for a small fee. The problem lies in the fact
that the fee is, in relation to the amount of the loan, and its repayment
schedule, huge!

What is a payday loan? A payday loan is a very short term loan, available
with no credit check, based upon your income and future paycheck. In most
cases, you can bring in a few past paychecks and get a loan for a few
hundred dollars. You normally do this by writing a postdated check for the
amount of the loan. It will be repayable from your next paycheck, usually
within two weeks. . When you put money in your account from your next
paycheck, the loan agency cashes your check. The fee is typically between
$30 - $50. That is a large percentage of a $200 - $500 loan for a two week
period!

There are times when there may be no other choice. It may be an medical
emergency or your car may be in desperate need of repair so you can get to
work. Try almost any other avenue to get the needed funds besides a payday
loan. Ask your boss or a relative. Try to get a temp job on a weekend. In
many cities there are temp labor agencies where you can earn $8 - $12 an
hour for one or two days of work. They pay at the end of the day. That would
be a far better choice in most cases than a payday loan.

If you find yourself needing a payday loan with some regularity, you need to
take a good look at your financial picture. Why is this happening, and what
can you do to avoid it? You are actually spending far more money by getting
these bridge loans to get you by until your next paycheck. Those loan fees
add up in hurry.

Be careful of online sites that automatically renew the loan during your next
pay period. In many cases the borrower is forced to sign loan agreements
that severely limit their legal rights in the event of a disagreement. You can,
for example be required to submit to binding arbitration instead of jury trial. In
addition, in many states the debtor is asked for voluntary wage assignment to
repay the debt.

The problem lies in the legality of such assignments. In many states these
assignments are flat out illegal. In most states, you can easily get a wage
assignment cancelled. You need only write a letter (not an email) to the
payday loan agency and send a copy to your employer. The wage
assignment should be terminated immediately. Make sure you check
everything extremely carefully in the event you go the payday loan route.

In addition, you need to be very aware anytime you send your banking, credit
and other personal information to a third party, as will be required when
getting a payday loan form an Internet vendor. Because of the convenience
of Internet based payday loans, they have proliferated greatly in the past few
years. Many do not readily disclose their interest rates, so be diligent and
check carefully.

LOAN AND DEBT
CONSOLIDATION