Payday Loans Money Today for Work Tomorrow

Created on 2008-04-10 05:05:23

It is Tuesday, you get paid on Saturday, but you have commitments, people to see, places to do, what can you do? The answer for many is to take a stroll down to the payday loan centers that are found all over the country. A payday loan is a short-term loan that can be a lifesaver for folks that have small emergencies which cannot wait until their pay check arrives.

The payday loan company brings this type of financing from shady dealings with unscrupulous loan sharks to the town’s main street. Friendly staff will now help you get the cash you need with the minimum of fuss. The payday loan usually involves the exchange of cash for a post dated check, if you can show that you have a steady income and some identification. The amount you can borrow can be up to $1500, and although this is a convenient way to get cash fast, it does have a downside which can amount to some serious debt.

The payday loan is generally short-term, usually no more than a couple of weeks until the next pay day. Subsequently, the cash advance company has a finance charge that can range from $10 to $50 per $100 that you borrow. Although initially this does not sound like a huge amount for the convenience, those charges are equivalent to 260% to 1300% annual percentage rate (APR). However, credit cards are often no more than 20% APR and expensive store cards can be as expensive as 30%, so the payday loan may not be the method recommended by financial professionals.

Another issue often identified with payday loans is the way in which a single loan can become renewed when you find you can pay off the initial loan only by getting a new loan to cover the first. This cycle can be repeated many times over and the compounded charges make the initial loan a very expensive transaction. If the charges on each loan are repeated many times over, the APR on these renewed loans total in the tens of thousands of percent.

The payday loan may be a lifesaver that allows you to borrow a small amount of cash until your next payday. It is a convenient way of guaranteeing instant funds when you have no other source of cash. However, there are downsides to the payday loan, so be smart and know the risks involved.