Customers at the grocery store all say that pay day loans are an easy way to get money when you don't have any. Payday loans might be the solution that people with low bank balances have been looking for. What could go wrong if I use these services? Don't they make more sense than credit cards?
It's better to pay a bill with borrowed money than to get bad credit because you didn't pay the bill. This is easy to understand. But if you talk to them about the situation, some financial institutions are willing to make an exception sometimes. Or, you might have to pay a small fee, but your credit report won't be made. Before making a choice, think about what it will really cost. Compare how much it costs to get a pay day loan (also called a "cash advance") to how much it costs to get a cash advance on your own credit card. Can family help? People who have to use pay day loans often can't pay them back by the time they get their next paycheck, which can lead to a cycle of debt and stress.
How much does it cost? Several sources, such as a report by the Federal Trade Commission (FTC) and the Consumer Federation of America (CFA), say that the average APR is between 350 and 650 percent, with some going as high as 780 percent.
Costs for a $100 loan range from $15 to $30. If the loan is not paid back by the due date, it can be renewed, but there will be a fee each time it is renewed. After 3 renewals, the fees on a $100 loan can add up to $60.
Payday loans don't seem to help the people who use them, and they seem to do more harm than good. Based on the warnings from the government and consumer groups, it is clear that using pay day loans or cash advances from these businesses can often lead to more debt and problems. It was said that some sites would automatically renew the loan and only take out the renewal fee when the loan was due. Other sites the CFA looked at required customers to sign a contract saying they wouldn't join class action lawsuits or file for bankruptcy.
If you are having trouble paying your bills, it is best to talk to a non-profit organisation in your area about credit counselling. These groups can help you lower your monthly payments and lower the interest you're paying now. If your budget is the problem, you should talk to a financial planner who can help you manage the money you already have and stay away from credit.
