What To Watch Out Before Availing Payday Loans? |
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Payday loans or paycheck loans are
generally secured by a personal check. There are some companies that require your bank account or credit card information along with or apart from a check. You write a post dated check or agree to have the amount withdrawn from your bank account after a given time period that is usually 14 days (14 days being the standard payroll period). On completion of the agreement, or the contract, of payday loans, you are paid an amount less than what you have agreed to pay. The difference is the fee for the loan service. You see them all over the town, especially in the poorer parts, with names like Quick Cash, Quick Loan, and Payday Loans. Today, they are sprouting up all over the country. Payday loans are the latest fad in greedy lending practices but still manage to avoid the regulations in most states. They don't charge any interest on the money; they just charge a fee. Payday loans sound like the ultimate in convenience. Need some quick cash? The solution lies with payday loans. Visit any payday loans' lender, and within five minutes you can be out with $100, $500, or even $1000 dollars. But have you ever tried calculating the true cost of this convenience? Why in the world are payday loan companies willing to lend you money so easily? Simple: Loaning out money at these fees amounts to a huge profit at your expense. For example, let's say you borrow $200 through payday loan, and the lender levies a fee of $15 for each $100. Within 14 days you will have to pay back $230 for borrowing $200. Now, if borrowing the $200 saves you from paying a late fee or penalty of $100 on something, then the amount borrowed is very much justified. Otherwise, you pay a very high price for the money. You pay 15% interest for a 14-day Payday loan, which comes to 3785% compounded interest annually. No wonder lenders are happy to loan you this money. If they give you $100 payday loans loan and you pay them back with an extra $15 in two weeks and they loan out the $100 again along with the $15 extra you paid, and they keep doing this for one year, they will turn their $100 into $3785 by the end of the year! Maybe you should be loaning your money to them rather than borrowing from them. Things that you should consider before availing the payday loans --Early repayment fees: Pay off your payday loans early and they sock you with another fee. --Late repayment fees: You may have to pay the entire fee again if you miss the payment date. --Membership fees: Some payday loans companies charge you to become their customer along with charging you as their customer. --Giving payday loans lenders access to directly debit your bank account. Just hand them your wallet, it's quicker. --Fine print (as in all contracts) Know what you are signing or don't sign it. --Bounced check or debit fees. Make sure you have money in your bank account or you get to pay your bank a fee as well. --Collateral requirements such as a car title! Miss your payment and you may be missing your car - permanently. Try To Find A Better Way The root problem here could be that you are getting strangled by your debt payments. Credit cards, store accounts, installment payments and such can eat up your income quickly. It may be time to visit a non-profit credit counseling service or create a debt reduction plan for yourself instead of getting payday loans. Or it could be that you are just spending more than you make. You may need to spend a few minutes each week and write down your expenses. Then categorize and total them to see where your money is going. Then record your income for the same time period and make sure that you are not spending more than you make. And the tracking of your expenses will avoid creating a situation where you need the payday loans. Sure, everyone gets behind occasionally. But you need enough room in your budget (this means spending less than what you make) to accommodate the budget busters and surprise expenses that may come up and lead you to payday loans. |
