Pay Day Loans - Do They Really Help?
Many individuals in America are trying to find creative ways of dealing with unexpected expenses
. Given the current economic climate, some are even just trying to deal with everyday bills. Where are they going for these quick infusions of cash? Can they go to a bank? Many individuals have maxed out credit cards or have poor or bad credit and cannot qualify for a traditional loan. If they have a monthly source of income, even if it is not a traditional paycheck, they may qualify for pay day loans.Consumers everywhere are flocking to their local check cashing stores in search of a pay day loan. It is a fairly simple process to be entered into their system, but once you are in, getting a pay day loan is usually quick and painless. Pay day loan companies will want a photo ID and proof of income to enter an individual in their systems. Once this is provided, the typical range of money available is between $100 and $255.
Pay day loans should not be used as a method of financial assistance over the long term. A $255 loan will usually cost $45, so the amount due at the end of the loans, which is often no longer than a 2 week time period, is $300. If an individual were to take out a payday loan every two weeks when they finished paying the previous one off, they would have burned nearly $1200 in fees.
What if someone needs more than a few hundred dollars? Online, there are seemingly an endless number of websites that are willing to loan up to $1500 in an hour or less as a pay day loan. What often times is not clearly disclosed is that new or newer customers will typically only receive a loan of a few hundred dollars, with a maximum payout often times around $500. Where the large sum of money seems very appealing, the consumer must be aware of how these loans work. They usually auto refinance, which means that at the end of each term, which is usually two weeks, the finance charge is added to the principle and the new finance charge is recalculated. For someone using one of these loans, if the fail to pay off at least the finance charge, they will be stuck in a downward spiral roller coaster of debt.
Where the large sum of money seems very appealing, the consumer must be aware of how these loans work. They usually auto refinance, which means that at the end of each term, which is usually two weeks, the finance charge is added to the principle and the new finance charge is recalculated. For someone using one of these loans, if the fail to pay off at least the finance charge, they will be stuck in a downward spiral roller coaster of debt.
There are other companies that offer loans to those who cannot get one through the traditional lenders, but with interest rates of over 90%, these loans can leave the consumer paying nearly 4 times the amount of the original loan.
At the end of the day, it is in each individuals hands to decide how to handle their finances. When used properly and with respect, pay day loans can be a helpful financial tool when there are no other options.
by: Ben Sparks.