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The Risks Of Getting A Pay Day Loan Or Cash Advance

RyanHupfer | Jul 28, 2009 |

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Whether we all like to admit it or not, there are times where each of us have been in a pretty tight financial spot where it would be great to have some quick money at our disposal without too much work on our end. I mean, let's face it, the easier the better and if we don't have to jump through all of the hoops that we thought we did, we're all about it. This is called a 'want it now' or convenient lifestyle and it's something that we've all seemed to get pretty used to. Well, this type of thinking has it's roots in all parts of our day to day lives, but the place where it can have the biggest impact is in our finances.

Easy money is something that we'd all love to have and if we don't have to work as hard as the next guy to get it, then even better. This type of thinking is the exact reason why there has been a huge jump in the amount of pay day loans and cash advance retail locations that you see in so many strip malls around town and why when you look up how to get your hands on some fast money online you see tons of ads that are claiming to get you the money that you're looking for really fast and really easy. Honestly, most of these payday lender claims aren't exactly false or part of some sort of scam, they just forget to tell you the things that can be very risky when taking on these types of loans. Here, I'll give you an example:

Let's say that you're in the market for a cash advance, so you being to search for payday loan lenders online. Once you find one that you think you're comfortable with you will need to give them a few personal details so that they can properly evaluate your loan application. Some of these details include:

Proof of your age (you will need to be at least 18 years old for most pay day loans)
Proof of your monthly income (you will need to take home $1,000+ each month)
Proof of a checking account (if you're applying online you will need to be able to accept electronic payments)
Proof that you are not currently paying off any other pay day loans or cash advances

Once you get through the approval process and your lender decides how much money they're willing to lend you, you will then need to give them a way to get their money back after your loan is due. For this example let's say that you need $500 and that the lender's fees are $10 per $100 loaned, meaning that you would need to pay back $550 to the lender after your 14 day loan is up. How this usually works is either the lender will have you write a post-dated check that they can cash after the 14 days that includes the loan amount plus fees. Or, they'll electronically take out the money that you owe them automatically from your checking account once your loan payment is due.

Although paying $50 on a $500 loan doesn't seem like a lot, it is actually an outrageous amount of interest that you have to pay in order to get the convenience of being loaned the money so fast and without something as common as a credit check. If you do go through with your pay day loan, be sure to keep this type of funding as an option only when you are in a financial emergency and never make a habit out of applying for them. If you do this, you could end up being much more worse off than you were in the first place.