Payday loans are small loans that are short-term, but are paid for at often extremely high rates. They go by many different names as well: check advance loans, cash advance loans, deferred deposit check loans, or the post-dated check loan. They are also a big way for finance companies to make a lot of money: people who take out payday loans have to pay a lot of money in order to borrow a small amount. In fact, the difference between the loan and the payment can be so exorbitant, and the fees for late payments can be so high, people are routinely warned against going for payday loans.
However, if you are down on your budget and need to tide yourself over until the next payday, then you may need a payday loan. How does the payday loan operate? If you need to borrow money, you will write a personal check for the amount that you want to borrow, along with a fee that is dictated by the lending company. In return for this check, the lending company will give you the amount on your check, of course without the fee.
The fee that will be charged for your payday loan will often be a percentage of the value of the money that you intend to loan; or it may be a set amount that builds up or adds on for every increment, say every hundred or five hundred dollars borrowed. You need to pay back your loan on your next payday. If you want to roll the amount over and delay your payment, you also have to pay extension fees over and above the lending fees that you incur. These fees build up exponentially, and they can be inconvenient to pay, to say the least.
However, if you need a payday loan, there are ways that you can get more for your money and therefore protect yourself against loan sharks, or anyone who may try to eat you out of house and home. For instance, you are protected by the Truth in Lending Act: under this act, the company that is carrying out the payday loan is bound by law to disclose the cost to you. Moreover, you need to be informed, and in writing, what the finance charges are on your loan, as well as the APR, or annual percentage rate. The annual percentage rate is the yearly cost of your credit.
You also have a few other alternatives that you may want to consider instead of banking on that often exorbitant payday loan. When you need money, shop through as many different payday loan givers as you can. What you need is a credit offer that has the lowest annual percentage rate, which you can obtain from a local credit union, a small loan company, or even a loan from your employer, friends, or family. If you absolutely need a payday loan and no one in your immediate vicinity is willing to give you any money, then you need to look at the finance charges as well.
Ask the payday loan giver for explicit details on the finance charges that you will incur. Such charges will include the fee for the loan, interest, other credit costs, and even bank charges for your check. Get the lowest cost amongst these payday loan givers, and do your math carefully. What you will want to do is to watch your credit and make sure to do shopping for payday loan givers well in advance.
The best way to solve your debt problems is to prevent them. Live within your means and work out a budget that is realistic: figure out how much you spend on utilities, groceries, and your other needs daily. If you are in debt or are on a very low budget, you may want to avoid buying small items: remember, that dollar or two will add up to large expenditures if you are not careful with your cash.
Always have savings: make it a habit to set aside a certain percent of your cash or pay each month, and put this amount in a separate bank account. This way, you always have money set aside for a rainy day.
These are only a few tips that you may want to take into consideration when you are looking for payday loans. The best remedy is prevention, but when you’re deep in debt already, don’t plunge in desperation. Always use your good sense first, and you will get the most out of your payday loan.