The pretty ugly truth about payday loans

paydayloanshopAlthough some conveniences are truly lifesavers, many come with a hefty price tag. Loans of any kind usually require solid credit and a good income. However, payday loans offer the average Joe with poor credit and perhaps a spotty work history a seemingly golden opportunity. The easy, breezy cash loan, with little or no credit requirements and the ability to use your job as credit worthiness, can appear to be hope for the masses. The ease and low requirements of the cash advances make these loans appealing to many. For example, here is a familiar scenario; your car breaks down and funds are low. You just paid rent, as well as the electric and gas bill and oh yeah, T-Mobile needs their cut too. With all your money tied up in bills, you wonder where you will find the funds to get Betsy, your old Honda Civic to run again. The outlook is bleak until one day while looking through the paper you see an ad for a payday loan. You read the details and getting the loan seems easy enough, in fact almost too easy. You decide to give it a try. Presto, the money is in your account just 48 hours later, and wow, you did everything online. Life couldn’t be sweeter. You collect your $400 and take old Betsy to the doctor. Then lo and behold, two weeks later an auto debit of $150 plus the original $400 loan is drafted from your bank account. You gasp at how expensive this seemingly wonderful convenience was.

payday loans

Pay Day loans offer a quick fix for small money crunches and can come in handy during periods of money shortages between paychecks. They usually don’t require a credit check of any kind, and instead allow the borrower to use his or her job as credit. Another positive is that the these small, short term loans often offer the option to pay the interest only and extend the payments out if the lump sum can’t be paid by the next pay day.

 

State laws govern how these loans can operate. Some loan companies will not operate in certain states due to the laws that regulate Payday loans. Although it’s not all that hard to get a short-term loan, you pay for the convenience of these types of loans in the form of much higher interest rates. You might end up paying back the original loan amount plus and additional 400% for some of these loans.

 

These loans are generally small amounts of money, usually $500 or less. The requirements typically have a condition requiring the borrower to give the lender pre- authorized access to his/her bank account, or to write a post dated check for the amount due in advance.

 

Convenience and easy qualifying are positive aspects of the Payday but you must keep in mind that the interest rates are generally much higher than conventional loans. In plain language, a $200 loan could end up costing you $600 or more due to the ridiculously high interest rates.

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