There are alternates to payday loans
They go under different names: check advance, cash advance, payday loans; yet, once your obtain one, you must pay back a sizable amount of interest. It’s easy to succumb to the temptation of securing such a loan. You hear how easy the loans are to get on the TV, over the radio and in your email or mail. Just enough money to tide you over until payday. However, paying back the loan amount is an entirely different story as it’s attached to an exceptionally high interest rate.
How the Loan Process Works
In order to receive funding, the payday lender electronically deposits an approved amount into your checking account, minus the fee they charge. You, in return, promise to pay the amount back the next payday. At that time, the lender electronically debits the amount. If you need to extend the loan, then a fee is charged for each extension. Under the law, lenders of payday loans must reveal the APR and dollar amount in financing in the contract.
A Case in Point
The ensuing loan amount can be quite expensive. Suppose you need to obtain a loan of $150 until your next payday. You agree to borrow the stipulated amount + pay the loan company’s fee of $15. You may have to extend the loan until after you are paid to yet another payday. Therefore, the payday lender tacks on another $15 to rollover the financed amount for two more weeks or until you receive your next check. When you include the APR, you can be charged as much as $50 or more just to obtain a small $150 loan.
Talk to your Creditors
If you run into a situation where you need a small loan to take care of a car repair or pay for an unanticipated household expense, then consider lower cost loan options. For example, if an unplanned expense cuts into your budget to the point that it will be hard to make some of your payments, contact your creditors immediately. Tell them your situation and try to work out some type of financial remedy. Many lenders will agree to extend your loan by including a late fee or by slightly increasing the interest rate.
Note your Daily Expenditures
If you are a member of a credit union, see if you can take out a small loan. Look for credit that offers a lower APR and fees. Check out your options online. Or, design a budget plan, making sure that daily expenses are tracked. Try to keep ancillary costs to a minimum, such as sodas, vending machine snacks and coffee. Isn’t it better to save a little each payday than use that amount to pay the high fees on a payday loan?
Make Sure you Have Overdraft Protection
If you don’t have it already, you may want to obtain overdraft protection. This type of safeguard can certainly come in handy if you are faced with paying any kind of large expense. You certainly don’t want to add more credit difficulties into the mix should you have to pay for any unforeseen costs.
If you have no other alternative available but to take out a loan from a payday lender, take out only what you can reasonably pay back out of your check. Make sure you still have some funds to see you through until the next time you’re paid.