Intro to Pay Day Loans
Payday loans are relatively small, short-term, unsecured,
consumer loans. Consumers apply for payday loans through the
Internet, with loans ranging from $100-$500. If approved, the
loan amount is then wired overnight into the applicant's
checking account.
More about Cash Advance Loans The term on payday loans typically
range from 4 to 18 days, coinciding with the applicant's next
payday. Some lenders charge a flat fee regardless of the length
of the payday loan, while some lenders vary the interest rate
depending on the length of the payday loans. Most payday loans
lenders and affiliates of payday loan lenders offer clients the
option of "rolling over a loan, meaning that the loan is
extended to the next payday and the subsequent fees are doubled.
The larger and more reputable online lenders will allow a client
to roll over payday loans no more than one to two times.
Currently, fees charged on payday loans online range from $15 to
$30 on each $100 advanced. Stated another way, annual percentage
rates for payday loans generally range between 400 and 1000 APR.
However, the cost of getting payday loans should be viewed as a
service charge. According to market research, banks and
merchants charge an average non-sufficient funds fee of $24 per
check. Credit card companies impose an average late fee of $26,
while auto finance companies charge $23. In contrast, the
average finance charge on a payday loan is about $18 per $100
borrowed.
Payday loans are an alternative to bouncing checks, pawning
personal property, or borrowing money from family and friends.
Consumers may also use payday loans to avoid late-payment
penalties and negative marks on credit ratings. Ideally,
individuals have money saved from each paycheck to prepare for
financial shortfalls or unexpected expenses. Realistically, many
people have a periodic need for short-term financial assistance.
When used responsibly, payday loans can provide valuable
assistance to these short-term cash needs. However, you should
evaluate the costs and benefits of all alternatives before
borrowing. Other forms of short-term credit that may be less
expensive include a loan from another institution, a credit card
cash advance, an account with overdraft protection, or a salary
advance.