By Ashley Russell on March 15, 2011
What is it?
.jpg.aspx?width=75&height=75) Payday advances are short-term loans based on an individual’s checking account, not their credit. They write a check for the amount they need to borrow plus the fees charged by the company and then receive cash. The lender then holds the check until the previously decided date—usually the next payday. Then the borrower can either allow the check to be cashed, have the money electronically transferred, or pay cash to settle the loan. These loans usually range from $100 to $1000 depending on state restrictions and laws on the maximum allowed to be given. These loans are short-term—usually two weeks—because most people are paid bi-weekly.
Why do it?
These loans are usual short-term solutions for individuals who have unexpected expenses arise and cannot use credit to pay for the expense. These loans are easy to get because all that the borrower needs is a checking account and a steady income. No credit check is required so it is a much stress-free way to get quick cash for those who have credit trouble.
Why not do it?
The main downfall to these loans is that there are very pricey because they have a lot of fees and high interest rates. For example, a simple $100 payday advance could wind up costing the individual as much as $15 to $30 in fees and interest. The advertisements of payday advances often gloss over these risks by talking more about how these loans are an easy way out of a tight financial situation. People who use these advances can often fall into these debt traps where they constantly need to borrow more to pay off the interest and fees accrued, raising their overall total debt.
Why consider it?
If you are in a tight money squeeze, and you need cash now, this could be the option for you. Keep in mind that there are fees and interest rates, so try to find the lowest fees and rate possible. Also consider the reason you are borrowing this money. If it is to make a payment on something add up the amount of fees and interest you would accrue by paying it late and then add up the amount of fees and interest you would accrue by taking out a payday loan. If the cost of paying late is higher than the cost of borrowing, then it would be in your best interest to borrow. Be aware of all of the fine lines to these loans and the other option that are out there for you to acquire money. |