.: Payday Loans - a terrible deal
By:Talbert
Category:Home / Finance / Credit / Loans
Most towns have a number of small shops that offer what are known as payday loans. These stores are usually found in strip malls and sometimes, depending on the laws of the state, they double as pawn shops. Their business model is a simple one - the lend money to people who need a little cash to tide them over until their next paycheck. The system is convenient and easy to use; you walk in, show some identification, and write a postdated check for the amount you wish to borrow plus interest.
On your following payday, the business cashes the check you have written and your loan is paid in full.
This seems like a great idea - helping people get to their next paycheck by lending them a few dollars in the meantime. What’s the problem? The problem is that few people realize just how expensive it can be to borrow money in this manner. The interest rates charged by these companies are often astonishing, and can reach the equivalent of more than 400% per year!
The interest rates that payday loan stores are permitted to charge vary from state to state, but a typical rate for a two-week loan would be 15-17%. That doesn’t seem like much if you are borrowing $100 and writing a check for $115; but the annual interest rate on such a loan is actually 390%, which makes it perhaps the most expensive way to borrow money. The joke in the industry is that it would actually be cheaper to borrow from a loan shark than from one of these legitimate businesses.
The lenders defend these rates, pointing out that such costs are necessary to protect their business overhead and high default rate. That may be true, but many borrowers are blue collar workers who live from paycheck to paycheck. It is easy to fall into the trap of repeatedly using such loans, and the interest adds up in a hurry, tuning a convenience into a nightmare. Someone who is “short” this week may also be short in two weeks, and a loan of a few hundred dollars can quickly turn into a debt of a few thousand dollars, especially when late fees and bounced check fees are added to the total. More than a few borrowers at such businesses have had to resort to personal bankruptcy in order to get out from under their mountain of payday loan debt.
Even more egregious is the fact that such loan stores are frequently located near military bases. Our military personnel aren’t well paid and several members of Congress are not pleased that these predatory businesses are setting up shop for the purpose of exploiting our men and women in uniform. Several states have already passed laws that place limits on the interest rates that such businesses may charge and others will undoubtedly follow. A better alternative for anyone with a short term cash shortage would be to take out a credit card loan or a home equity line of credit instead. There is usually a small fee associated with such a loan, but the interest rates, which are probably no more than 30% , are far more reasonable than the 400% per year charged by the payday lender.
Anyone considering a payday loan should read the terms of the agreement carefully. Otherwise, that short term loan could haunt you for years.
Talbert Williams offers debt consolidation referrals and advice. For more information, articles, news,
tools and valuable resources on debt solutions, visit this site: http://www.1debtfreedom.com
Article keywords: debt, debt consolidation, finance, family, home, mortgage, real estate, marketing, credit card debt, parenting, home, living
Article Source: http://www.articles32.com
Talbert Williams offers debt consolidation referrals and advice. For more information, articles, news, tools and valuable resources on debt solutions, visit this site: http://www.1debtfreedom.com
.: New Loans Articles
1). Tell You More About Intended Payday Loans
Payday loans are intended to tie borrowers over until the next paycheck arrives. The downside is payday loans have steep fees and APR (Annual Percentage Rates) and can lead to bankruptcy and debt.
2). How To Get Your Unsecured Business Loan
If you just had more money, you are sure that your small business can take off to the next level. The assets that you might use for collateral are all tied up - leaving you with none available.
3). Secret of Credit Score Range
Commonly credit score range used by credit bureaus.
4). Guide to Credit Score Online
The secret of free Credit Score.
5). Are There Any Benefits To Owning A No Annual Fee Reward Credit Card?
Are you thinking of applying for a credit card that do not carry any annual fees but hesitant to do so? Did you ever wondered why credit card companies are willing to forgo the revenue from the annual fees? Are there real benefits from owning such a credit card or it is just another marketing ploy used by the credit card companies? Read on to find out the answers to all these questions.
6). Online Pay Day Loans Canada: Cash in 24 Hours
Online pay day loans in Canada provide a quick rescue when you have a financial emergency to cover immediately. Imagine if you are just handed a bill of $500 for your car repair. Your pay day is still weeks away and you are tight in cash already, not too mention if there are outstanding bills to be paid.
7). Everything You Need to Know About Secured Loans
With the rise of house prices, if you need some extra cash to fund a special purchase, taking out a secured loan just may be the right option for you.
.: Top Loans Articles
1). Help! My Friend Wants Me to Cosign A Loan
Many people find it difficult to get a loan if they have bad credit. For them one of the easy ways to get credit is through cosigning a loan. If you have been asked to cosign a loan by your friend or relative, there are several things you need to consider before asking where to sign.
2). No Teletrack Cash Advance – Avoiding Financial Difficulties
Fast and easy cash advance with no teletrack is ideal for you in case of financial emergencies. Companies offering no teletrack cash advance offer short term, low amount loans, lasting between 7 to 21 days – and hence do not verify information using the teletrack system.
3). Let Your Dreams Come True with Bad Credit Secured Personal Loan
Are you not able to fulfill your dreams just because of your bad credit score? Thanks to bad credit secured personal loan, with the help of which you can grab your dreams without any hurdles. Different people have different requirements and it is the occupation of this loan to give a better path to satisfy their necessities.
Bad credit secured personal loan is meant for homeowners who don’t have any problem in putting their property as collateral against the loan amount.
4). Unsecured Personal Loans For Non-Homeowners
Unsecured personal loans are especially fashioned to provide for the financial demands of tenants or non-homeowners. Tenants commonly do not own property to use as collateral. Many lenders are willing to work with individuals who have no personal assets. Interest rates may be a little higher and the loan amount can be limited. This type of loan is considered one of the more flexible loans with no mandatory collateral required, which is why it is known as an unsecured personal loan.
5). Do You Struggle to Get Business Credit without a Personal Guarantee?
Getting business credit can be a dificult thing to do. Lenders do not want to finance your venture if they don't believe you have a stake in the business. However, if you can overcome their doubts, you will be able to get separate credit in your business name.
6). Unconventional Job? You Need An Unconventional Loan!
Many people have dreamed of starting their own business, and it can certainly be satisfying. But what happens when you need a loan? If you’re self-employed, even if you have an excellent credit history, you may find it hard. Even though the banks are more flexible these days, and loaned out £41.2 billion to those working for themselves or with less than perfect credit scores, an amazing nine million people were turned down for a loan last year.
7). How To Do A Credit Card Debt Consolidation
Credit card debt consolidation allows you to pay your current debts in 3-6 years. Under a debt consolidation plan, terms and conditions change. The purpose of debt consolidation is to speed up your paying time and at the same time makes lower monthly bills.