The Safety First Guide To Payday Loans
The payday loans industry might not be the fast-growing beast it was a few years ago, but make no mistake. There are still plenty of companies offering fast cash in return for high interest repayments.
Our safety first guide to payday loans will tell you all you need to know to ensure you don’t get stung with debts that are impossible to pay back.
What Are Payday Loans?
Payday – or ‘no credit check’ – loans are short term loans, typically of low value. Many people use them when they are short of money at the end of the month and need to free up some cash to see them through.
They will approach the lender, apply for a loan and then pay it back – along with a small fee – before a set due date.
Who Uses Payday Loans?
It’s fair to say that rich people don’t take out payday loans. In fact, the demographic these kind of loans are marketed to is probably the very one that shouldn’t use them.
Payday loans are used by those whose money can’t stretch to last until they get paid or who are under extreme financial difficulty and have bad credit. They are also used by people that cannot get out of the debt spiral.
Fees, interest and charges vary greatly from company to company. But, in general, it is fair to say that payday loans are incredibly expensive.
Let’s say you borrow $100 for a month, at a cost of $30 – or 30 percent. If you don’t pay back the original loan and the fee – which now comes to $130 – by the due date, another 30 percent – or $39 – gets lumped on top. You now owe $169. Just one more payment missed and that $100 has now cost you nearly $220 – after just three months!
It’s easy to see how things can spiral out of control. The costs of taking out a payday loan can actually reach an annual percentage rate of anywhere between 1000 and 6000 percent.
Are Payday Loans Ever A Good Idea?
In defence of the payday loan companies, they are incredibly convenient, and they do have benefits. You don’t often think twice when you pay a vastly inflated price for an item at your local independent store. Especially if it saves you having to go all the way out of town to the mall, for example.
If you are really stuck for cash over a weekend you can certainly make them work for you. The trick is to do a lot of research about the companies you are dealing with. If they are upfront with you and offer legitimate advice it might be worth investigating further. For example, americanwebloan.com have a list of resources you can make use of on their website.
If you have to get hold of some money from somewhere, then a company that offers quick loans could help you out. Just make sure you know exactly what to expect.
Find out exactly how much your interest will be and only take them out if you have a financial plan to pay it back. The quicker you do, the less you will pay.