Payday Loans: Easy Money Comes at a Price

Some months are bound to seem longer than others, especially if a) you are living paycheck to paycheck and b) you have unexpected expenses. One disaster after another, you are aware that each of these expenses is to burn a hole in your pocket. Then it takes a turn for the worse: you won’t have any spare cash until the next paycheck.

How can you create a sum of cash out of thin air? Fortunately, there is always a way. Feel free to apply for a payday loan to get urgently needed cash. Conventional loans are to help you get through days of hardship. While this kind of loan is to cover your expenses until your next payday. It suits your purpose exactly, right?

If you have taken out a payday loan, you can just pass this. But for beginners, you may want to know each and every detail of it, such as…

How does a payday loan work?

The so-called payday loans go by several names: paycheck advances or cash advances. At its basic, it’s a small, short-term financing: making advances on your next paycheck.

How can you get such a loan?

It’s rather easy. You go to a store doing payday loan business. You don’t have to present any sort of credit report; all you need is a bank account with good standing. You don’t have to wait for days for the approval; all you need to do is write a postdated check to the lender stating the full amount of the loan plus fees. That amount of cash will show up in your account within two business days.

How much can you borrow?

Obviously not enough to buy a house. It’s a small loan up to 1,000 dollars, which is meant to cover your daily expenses until your next payday comes.

How to pay back?

You, as a borrower, are expected to return to the store and repay the loan in person. What if you don’t feel like repaying it in person? Well, your lender may redeem the check. What if you are behind of repayment? Well, you may face additional penalty fees plus the costs of the loan itself. That’s a lump sum of money, which may go way beyond the amount of money you borrow.

That said, you may feel unable to hold yourself back from rushing into that store to snag that kind of easy money, but…

Easy payday loans don’t come free

They come at a price. And in this case, the price is pricey. Over the years, concerns grow over the payday loan trade, mainly because of the unreasonable fees attached. You will be charged from 15 to 30 percent of the amount borrowed.

Remember what a payday loan is? It’s a short-term loan covering your expenses until your next payday, which is about a month. So, it is 15 to 30 percent on just a few weeks. What does that mean? If comparable to getting a conventional loan, that is a loan with an annual percentage of almost 800 percent.

There are laws, regulations meant to prevent excessive interest rates and fees in this trade. Some states limit the APR that any payday loan lenders can charge. Some even outlaw this kind of lending to the core. And there are states and jurisdictions having very few, if any, restrictions on payday lending.

As a result, you get to pay for that easy money in a desperate situation. Actually, most borrowers won’t turn to payday loans if they are not that desperate.

Final word: nothing comes easily. Think about it.