Payday Loans Defined
A payday loan, sometimes also called a paycheck or payday advance, is a short term emergency loan until your next pay check. Payday loans are sometimes even called cash advances. Cash advance through a payday loan is very different from a credit card. Credit card companies issue a line of credit that allows you to withdraw a pre approved amount of cash at your convenience. Payday loans issuers need to approve your cash advance every time you withdraw. The other major difference between s payday loan issuer and credit card issuers is the amount of interest that is charged. Payday loan issuers charge you based on how much you borrow. This amount is usually somewhere between $10 and $20 per every hundred dollars borrowed. Payday loans are very helpful, however, borrowers must use them responsibly.
Payday loans are used for a wide variety of purposes. Payday loans are great for those who do not have a credit card or whose credit cards are maxed out. They can be used to handle minor emergencies such as sudden car repairs or medical bills. For example, if your car breaks down and you need to $500 to fix it, a payday loan might be the only form of credit available to you. Many people need their vehicles to get back and forth between work, especially, in areas where there is limited sources of public transportation. A payday loan might be the only source of funding available to repair your car. This quick emergency loan may provide you the means to fix your car, get to work, and continue to earn money.
Payday loans may be as financially dangerous as they are useful. The amount of interest charged on a payday loan is extremely high. No bank or credit card company will charge as much interest as payday loan issuers. A $15 charge on a $100 2-week payday loan is equivalent to a 390% annual interest rate. There are 26 pay periods in a year. The $15 charge you are paying on $100 is equivalent to 15%. Multiply 26 by 15 and you end up with 390%. That is an exorbitant amount of interest charged. Charges, like interest, will begin to add up quickly if payments are missed. Should you fail to pay your loan in the 2-week allotted time period, your principal will rise. Charges will add up even faster if you miss any payments in between or fail to pay your principal. Therefore, it is very possible for your $100 loan to end up costing $300.
Payday loans are regulated from state to state due to the controversy surrounding the amount of interest lenders charge. In total, there are more than 35 states who regulate payday lending. Essentially, payday loans are regulated in states that limit how much interest can be charged in very small, or micro loans. Payday lenders are permitted to charge unlimited rates in states that do not cap interest charges on small loans.
Payday loans, allow people who otherwise can not borrow through traditional means, such as banks or credit cards, the ability to borrow money. It is very easy to obtain a payday loan. All that is required is a job and a checking account. However, these loans are only intended for a very short period of time only. Payday loans should always be paid on your next payday. Borrowers run the risk of paying very high interest rates should they fail to pay the loan timely. Payday lending is regulated from state to state. Should you wish to inquire about payday lending laws within your specific state, you may refer to online resources such as www.PaydayLoanInfo.org. Lastly, be sure and use payday loans responsibly and sparingly or face the possibility of paying the loan for a long time.
A payday loan, sometimes also called a paycheck or payday advance, is a short term emergency loan until your next pay check. Payday loans are sometimes even called cash advances. Cash advance through a payday loan is very different from a credit card. Credit card companies issue a line of credit that allows you to withdraw a pre approved amount of cash at your convenience. Payday loans issuers need to approve your cash advance every time you withdraw. The other major difference between s payday loan issuer and credit card issuers is the amount of interest that is charged. Payday loan issuers charge you based on how much you borrow. This amount is usually somewhere between $10 and $20 per every hundred dollars borrowed. Payday loans are very helpful, however, borrowers must use them responsibly.
Payday loans are used for a wide variety of purposes. Payday loans are great for those who do not have a credit card or whose credit cards are maxed out. They can be used to handle minor emergencies such as sudden car repairs or medical bills. For example, if your car breaks down and you need to $500 to fix it, a payday loan might be the only form of credit available to you. Many people need their vehicles to get back and forth between work, especially, in areas where there is limited sources of public transportation. A payday loan might be the only source of funding available to repair your car. This quick emergency loan may provide you the means to fix your car, get to work, and continue to earn money.
Payday loans may be as financially dangerous as they are useful. The amount of interest charged on a payday loan is extremely high. No bank or credit card company will charge as much interest as payday loan issuers. A $15 charge on a $100 2-week payday loan is equivalent to a 390% annual interest rate. There are 26 pay periods in a year. The $15 charge you are paying on $100 is equivalent to 15%. Multiply 26 by 15 and you end up with 390%. That is an exorbitant amount of interest charged. Charges, like interest, will begin to add up quickly if payments are missed. Should you fail to pay your loan in the 2-week allotted time period, your principal will rise. Charges will add up even faster if you miss any payments in between or fail to pay your principal. Therefore, it is very possible for your $100 loan to end up costing $300.
Payday loans are regulated from state to state due to the controversy surrounding the amount of interest lenders charge. In total, there are more than 35 states who regulate payday lending. Essentially, payday loans are regulated in states that limit how much interest can be charged in very small, or micro loans. Payday lenders are permitted to charge unlimited rates in states that do not cap interest charges on small loans.
Payday loans, allow people who otherwise can not borrow through traditional means, such as banks or credit cards, the ability to borrow money. It is very easy to obtain a payday loan. All that is required is a job and a checking account. However, these loans are only intended for a very short period of time only. Payday loans should always be paid on your next payday. Borrowers run the risk of paying very high interest rates should they fail to pay the loan timely. Payday lending is regulated from state to state. Should you wish to inquire about payday lending laws within your specific state, you may refer to online resources such as www.PaydayLoanInfo.org. Lastly, be sure and use payday loans responsibly and sparingly or face the possibility of paying the loan for a long time.
Labels: apply for a payday loan, credit card, credit card issuers, credit cards, payday loan lenders, payday loans
Credit Card / Financial news blog post by Todd Holliday at 6:55 PM 