Pay Day Loan? Stop!
Before you take out that Pay Day Loan, it might pay you to read the fine print!
I got an invitation in the mail for a Pay Day Loan. "Get your Pay Day Loan and avoid bounced checks and late fees!", the ad said. That sounded great. I've never taken advantage of a service like that. They offered a quick and convenient installment loan and all I needed to do was use my computer to apply online. They advertised an easy application form to fill out with no fee for applying. I could have my Pay Day Loan in minutes! They also offered flexible terms from 4-9 months with no prepayment penalty. But what would that cost me in the long run?
What that Loan will cost you is something you need to consider.
How long will it be before you can pay the loan back in full? How much will you be required to pay back? Will the interest fees for that loan be more or less than what any bounced check or late fees will cost you? You need to read the fine print on these loan agreements or you might find yourself shocked at what you will have to repay. Always read the terms and make sure you understand them!
Checking the fine print on this wonderful offer, I found that if I borrowed $600.00 for 14 days I would have to pay back $738.19! What? Did I read that right? That's $138.19 in addition to what I borrowed. And I only had the money for 14 days! The APR on the interest was 603.84%! That's insane! The interest on this loan can get real expensive!
It gets worse if you stretch those payments out. If I pay the lender back in 3 months, that's 12 weeks, making bi-weekly payments of $105.11, I would have to pay back $2,522.64 for a $600.00 loan at an interest rate of 359.01%! I'm having a hard time believing this is actually legal! No wonder people are occupying parks in cities all around the country! I'm all for free markets but sheesh! This is a little over the top!
A Pay Day Loan should be used for dire emergencies only!
If I had borrowed money from some guy known on the street as "Guido The Leg Breaker" and needed cash asap to avoid personal injury, I might consider this type of loan. Otherwise, I'm not sure how bad off you would have to be to go this route. The savings in late fees and bounced checks would certainly have to exceed the insane interest rate you would have to pay. You would also want to get the loan paid off as soon as possible. I'm sure you would be much better off checking with your bank on a short term loan, getting a cash advance on your credit card, or simply borrowing from a friend. Friends normally don't charge interest.
Pay Day Loan interest rates are income killers!
To summarize, before you take out a Pay Day Loan, make sure you get the money back to the lender as soon as possible. Otherwise, your loan will transform itself into a Pay Them Loan. If you're struggling to make ends meet, you may find yourself involved in something that you can't possibly afford.
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