Payday Loans Save You From Financial Pain
By Jack Landry
When people hear the term payday loan they are usually unsure what it means. Different images pop into their minds about that new store that popped up on their favorite route to work.
They may even remember a commercial they saw or something they've heard in quick passing. Because of this, it is important to dive into why they exist and what they truly are so consumers know what this rapidly growing industry is all about.
Payday loans are short term loans that were created to help people out of unexpected financial crises. They last only a short while so the borrower can quickly pay them off and then be on their way to financial freedom.
They are ideally a cash advance of their paycheck. This means that when something arises and you are not financially prepared to take care of it, but you would be able to if you had your next paycheck, you can go to any payday lender and take out a loan for your next paycheck.
You are then given the cash and are free to do with it what you want. This industry is rapidly growing because many are discovering that it actually saves them money if they choose to take out a payday loan.
Consider that you are facing a $100 debt and you have to pay it off by the end of the week. This could be anything from rent to cell phone to car repair.
When any number of these things happens at the same time it can seem overbearing and a burden to any budget. Many are tempted to simply wait for their paycheck to come the following week to pay all of these things off.
The problem with doing so is the fact that there are additional fees that will come if you hold off on being current with these bills. The longer you go, the more interest will accrue on these costs.
It seems then that you could just write out a check for money that you do not currently have and pay off these bills in no time. If you write these checks and then the recipients do not deposit them until after you receive your paycheck, then you would be in the clear.
What is important to remember is that banks charge a various fees. These fees range from $25 to $50 and are added to checks that bounce.
When your checks are taken into any bank or financial institution, they will not clear because you do not currently have sufficient funds. You will then be charged this fee from you bank and thus owe more money.
Payday loans try to help you avoid these costs. On a $100 loan, the average daily fee is just over a dollar.
At the end of two weeks you will be paying just $115 for this loan. This means that if you choose this option you will be spending the least amount of money and thus actually saving your cash.
Although these fees seem relatively small, many have heard negative remarks about the annual percentage rate, or APR of these loans. This is because this number is misunderstood and does not adequately portray how much you will be paying in fees in the short term.
The APR determines how much interest will be paid over the course of the year if the loan were to last that long. Because these are short term loans, they do not accrue that much interest.
In order for this to make the lenders any money, they have to raise the APR so it can have a minimal effect in just two weeks. Because payday loans exist to help you, taking one out is a simple and easy process.
All you have to do is walk into any payday lender and explain to them how much you need and how long you need it for. In doing this they can figure out how much you will be charged in fees and let you know upfront what the costs will be.
Upon showing them proof of income, like a paystub, you then write out a check for how much you need to borrow plus how much the fees are. This check is dated in advance for the day when the loan expires.
You are then handed your money and they are given the check. The lender is then able to take in the check when the loan ends.
Because the lender will take the check to get it deposited when the loan ends, it is important you make sure your future paycheck is in your account. In doing this, you will save yourself further financial hurt and benefit from taking out a payday loan.
About the author
Jack R. Landry has a PHD in financial services and has written hundreds of articles relating to consumer services and payday loans. He has been a consumer advocate for nearly 25 years.
Contact Info:
Jack R. Landry
JackRLandry@gmail.com
http://www.CheckCity.com from http://www.FreeArticlesAndContent.com
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