People have been taking out what we call payday loans since time began. Many times it was called an advance that you would get from an employer. On the seedy side it may have been a visit to the local loan shark. Then there was always the pawn shop where you could hock your watch for a temporary loan. Today and entire industry has grown up dealing only with payday loans.

Paycheck loans are unsecured, short term, and typically are not greater than $1500 and usually much less. The payday loan is designed to tide a person over when their money runs out before their paycheck arrives. Consequently these loans are for 7 to 14 days.

When people with good credit find themselves in a cash crunch before payday, they will use their credit card to cover the shortfall. However, people with no credit or bad credit have little choice in how to come up with cash on short notice. Payday loans provide the financial backup that credit cards do for people with good credit. So if the loans are providing a value to people who would otherwise have no access to credit, why do so many people think they are a rip off?

The answer of course is the interest rates charged. Depending on state regulations, the interest on a 7 day loan can be as high as 500% when annualized. A $100 seven day loan can cost the borrower $21 in interest. Consumer advocate groups call these rates outrageous and contend that the payday loans are predatory and target the poor.

Payday loan companies do target poor areas. In fact over 80% of their stores are located in areas designated as distressed or poor. Banks on the other hand, stay away from those areas with only 34% of their total facilities serving poor areas. When you are the only game in town, as the payday loan people are, you can pretty much charge what the market will bear.

Why aren’t banks providing these kind of loans? For starters they are just too small. Banks are also locked into procedures and are regulated regarding their lending policies. Payday loans only require verification of ID, a checking account, and proof of employment. There is no credit check and no inquiry goes on the consumer’s credit report. Loans are typically wired into the applicant’s bank in a single day.

Payday loan customers don’t see the loans as a rip off. Firstly, where else can a person with bad credit get a loan to cover emergency needs? Secondly, payday loan customers don’t view the loans as an everyday resource but one that they will only use rarely. It’s like buying a $4 cup of coffee in an airport knowing you can get it for $1.50 at McDonalds but you’re trapped in the airport. You want the coffee so you buy it. Paying $60 two weeks from now in order to get $200 today so you can pay the utility bill is just the cost of doing business.

With unemployment nearly at 10%, payday loans are now tapping into a new market via the internet. Scores of payday loan companies are now reaching the formerly good credit customers who now find that there credit has taken a dive and are unable to obtain conventional lending. Online loans work the same way as the shop loans and are fast, convenient and offer the financial support that is not available otherwise.

If you find yourself in this “new” market catagory and you are considering using a payday loan, make sure you do your research. Interest rates between companies will probably not be different because they will charge the most allowed by your state law. The place to look for differences is in service fees and features. Read the terms and conditions carefully and fully understand the consequences of not paying the loan back on time. Make sure you can afford the loan.

A payday loan is a way out of a tough spot in your cash flow. Maybe you can’t use a credit card for some reason. If so, you can take out a payday loan for some quick money. The money you get via the paycheck loan can be utilized to pay off your bills and you use your next paycheck to pay off the paycheck loan plus interest.

A paycheck loan is perhaps the fastest type of loan, but it does have very high interest rates. Because of these high interest rates, use them only for emergencies. If you can loan money from another source, it’s almost always less costly. Not paying back on time will increase the high interest rate of a payday loan even more.

Not paying off your paycheck loan is a bad idea. Payday loan conditions are prepared in such a way that interest rates go up dramatically the second your payment is overdue. Trying to skip out on paying can have serious results. That $300 payday loan will turn into a nine hundred dollar debt in a very short time span.

If you determine not to pay that amount, the lender will go to court. A payday loan lender has seen this all before, so don’t expect him to quit. . It is highly probable you won’t win in the courtroom. This means extra costs on top of your payday loan debt. Which would make your $900 debt transform into the grand total of $2.500.

If you can not pay that amount of money, the lender will get a lien on your house. The lien will be put on your personal property if you don’t own a house. The payday loan lender will get his money one way or the other. It may even land you in prison in some states.

Be sure you can pay off a payday loan on time before you sign the contract. Don’t just close a paycheck loan out of financial dire straits, because everything will get even worse when you don’t pay it off on time.

If you’re strapped for cash, you don’t have to look hard to find ads for payday loan services. It’s a big industry now, with over 10,000 payday loan businesses in the US. It’s easy to find a payday loan company online or near you.

You will find the advantages listed everywhere. A payday loan is quick first and foremost. You can get through the application process in less than 20 minutes, you can get the money within a day. That’s quick cash.

Most people use it to cover a temporary shortage in their monthly budget. If you use it in that way, it’s not a bad solution. As long as you know you’ll be able to pay it all back in time.

No matter how nice payday loan people are, they’re still in the business of making a profit. They do this by charging interest on your loan. Some loans have low interest, some have high interest. A payday loan has a special kind of high interest.

Recently, government bureaucrats have tried to win votes by uttering their disapproval of the payday loan business. They profile payday loan companies as evil predators, preying on the poor consumer. This is of course not the whole picture. But admittedly, payday loan interest rates can reach some pretty steep levels. The interest rates really kick in when you’re forced to renew or extend your payday loan because you can’t pay it off in time.

A payday loan can be a solution, but only if you’re careful about the deadline. Make sure you pay it back in time, or the high rollover interest rates ramp up very fast and you may find yourself even deeper in the hole.

If you’re strapped for cash, you don’t have to look hard to find ads for payday loan services. It’s a big industry now, with over 10,000 payday loan businesses in the US. It’s easy to find a payday loan company online or near you.

On every payday loan site, you will find the advantages listed. A payday loan is quick. If you’ve tried the regular loan process before, you know that it can take days or weeks. You can get through the payday loan application process in less than 20 minutes. The money is transferred to your account within a day.

Most people use it to cover a temporary shortage in their monthly budget. If you use it in that way, it’s not a bad solution. As long as you know you’ll be able to pay it all back in time.

The payday loan companies are not in business to give you financial support in tough times. Like all other businesses, they need to make a profit. They do this by charging interest. In the case of payday loans, pretty high interest.

Many local bureaucrats frown upon the payday loan business. Payday loan companies are usually profiled as ‘predators’, preying on the unsuspecting consumer. The interest rates of a payday loan can reach pretty high levels. If you find out you can’t pay off the loan with your next paycheck, you will have to renew or extend your payday loan. This means that your interest effectively doubles. It can end up costing you about $ 50 interest to get $ 100. Pretty steep interest.

If you’re careful about the deadline and you pay it off in time, a payday loan can be a solution. But be sure you pay it off in time, or the high rollover interest rates will get you in trouble.

Many states have regulated the maximum APR for payday loans, which is a good thing – but don’t think that it’s only going to be something like 10! A short term loan often has high APR.

What’s APR?

Some people don’t know what APR is, or what payday loan APR is – or if it’s different at all.

APR stands for Annual Percentage Rate, which is basically the annual interest rate on the loan itself. With large loans, like a home loan, or small business loan, the APR is usually very low, mostly because the loan is paid back over a long period of time.

However, with Payday Loan APR, it works a little differently.

How Does Payday Loan APR Work?

Payday loan APR is a much, much bigger number than a home loan APR is – it has the highest interest rates on any sort of loan, but that’s because it is a very short term loan. Usually between 7 and 14 days, these loans don’t span much at all – so you usually end up only paying between $10-$40 in interest.

You can normally find APR numbers between 250% – 390%, which is rather large, until you consider that you’re borrowing just a small amount, and you’re going to pay it back quickly.

Some states have regulated the highest possible APR that payday loan companies are allowed to use, along with other things – like how long a loan can be out, and if you can renew it or extend it in any way. These laws vary wildly – while some states have very strict laws, some have none at all.

When Searching for a Payday Loan…

When searching for a payday loan APR should be something that you keep at the top of your head. The lower the APR, less that you have to pay when you’re going to pay back your loan.

Watch out for fees, too – while the APR might look attractive at first glance, finance fees will end up costing you twice what you’re paying in interest. Keep your eye out for the best companies that offer the lowest fees, and interest rates.

Remember…

Remember to borrow wisely, and don’t go with a company that has too high of a payday loan APR – you’ll feel the crunch later!

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