Payday loan companies gives the borrower the amount of the check minus
their fee (They get their money up front).
Fees charged for payday loans are usually a percentage of the face value of
the check or a fee charged per amount borrowed for every $50 or $100 loaned.
A cash advance loan secured by a personal check - such as a payday loan - is
very expensive credit.
Let's say you write a personal check for $115 to borrow $100 for up to 14
days. The check casher or a payday loan lender agrees to hold the check until
your next payday.
And, if you extend or roll-over the loan - say for another two to four weeks
- you will pay A Fee Each Time you get a extension.
Under the Truth in Lending Act, the cost of payday loans - like other types
of credit - must be disclosed.
Among other information, you must receive, in writing, the finance charge (a
dollar amount) and the annual percentage rate or APR (the cost of credit on a
yearly basis) which when you do the math can be very high.
Top 10 Alternatives to Payday Loans!
1. There are other options. Consider these possibilities before choosing a
payday loan:
2. When you need credit, shop carefully. Compare offers. Look for the credit
offer with the lowest APR - consider a small loan from your credit union or
small loan company, an advance on pay from your employer, or a loan from family
or friends.
3. A cash advance on a credit card also may be a possibility, but it may have
a higher interest rate than your other sources of funds: find out the terms
before you decide. Also, a local community- based organization may make small
business loans to individuals.
4. Compare the APR and the finance charge (which includes loan fees, interest
and other types of credit costs) of credit offers to get the lowest cost.
5. Ask your creditors for more time to pay your bills. Find out what they
will charge for that service - as a late charge, an additional finance charge or
a higher interest rate.
6. Make a realistic budget, and figure your monthly and daily expenditures.
Avoid unnecessary purchases - even small daily items. Their costs add up.
7. Also, build some savings - even small deposits can help - to avoid
borrowing for emergencies, unexpected expenses or other items. For example, by
putting the amount of the fee that would be paid on a typical $300 payday loan
in a savings account for six months, you would have extra dollars available.
This can give you a buffer against financial emergencies.
8. Find out if you have, or can get, overdraft protection on your checking
account. If you are regularly using most or all of the funds in your account and
if you make a mistake in your checking (or savings) account ledger or records,
overdraft protection can help protect you from further credit problems. Find out
the terms of overdraft protection.
9. If you need help working out a debt repayment plan with creditors or
developing a budget. There are non-profit groups in every state that offer
credit guidance to consumers. These services are available at little or no cost.
Also,
10. Check with your employer, credit union or housing authority for no or
low-cost credit counseling programs.
