|
Debt Consolidation – Watch out for Payday Loans
By: Charles Essmeier
Most any large city has a number of small shops offering payday loans. They’re often found in strip centers; sometimes they double as pawn shops. They have a simple business – they lend you money until your next paycheck. The system is pretty convenient; you write them a postdated check for the amount you’re borrowing plus interest. On your next payday, they cash the check and your loan is paid off. What many people who use payday loan services fail to realize is that the interest rates charged by these firms are substantial, often reaching the equivalent of four hundred percent per year!
The interest rates charged by payday loan stores varies from state to state, but a rate of 15-17% for two weeks is not unusual. This translates to 390-440% per year, which is a staggering amount of interest to pay on a loan. The lenders say that these amounts are fair, and are necessary to cover the overhead associated with running a business and to account for a substantial number of borrowers who fail to repay the loans. That may be true, but that high of an interest rate can turn the “convenience” of a payday loan into a nightmare. Many borrowers are relatively low paid blue-collar workers who live from paycheck to paycheck. Someone who is a “bit short” this week may also find themselves short again on their next payday. If they fail to pay back the payday loan, the interest continues to accrue and additional penalties, such as returned check fees, may apply. It is quite common to see loans of $300 or so turn into debts of several thousand dollars, especially if the borrower compounds the problem by borrowing funds from a second payday loan store to pay the loan from the first one.
Several states have already passed laws capping the interest rates that may be charged on payday loans. Others will undoubtedly follow. A good alternative to the payday loan would be to take a cash advance on a credit card. There is usually a fee associated with a cash advance, but the annual interest rate, combined with the fee, is still a lot cheaper than a loan at 400%. Anyone who is considering taking out a payday loan should read the terms carefully. Otherwise, that “loan until payday” could be there to haunt you for a long time.
About the Author
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a site devoted to debt consolidation and credit counseling, and StructuredSettlementHelp.com, a site devoted to information regarding structured settlements.
Payday loan A Complete overview
Why Starve Your Needs When Payday Loans Are There
Payday Loans How To Make Them Work For Youh
Internet Payday Loans Tricks And Tips
Payday Loan Advantages
Payday Loans How To Make Them Work For You
Alternative ways to avoid payday loan
Payday Loans The Legal Loan Sharking Industry
Should you ever take a payday loan
Benefits of a payday loan
Compare Payday Loan Or Cash Advance Lenders Online
Cash Til Payday Loans When Is The Best Time To G
Online PayDay Loans How to Gain an Advantage over
Payday loan companies
PayDay Loan Online How Do Online Payday Loans Wo
Payday loans examine your alternatives
Do Payday Loans Deserve a Bad Rap
Debt Consolidation Watch out for Payday Loans
Quick Cash Advance Payday Loan Get it Free or Ch
What are Payday loans and how they can be very exp
What to check out when you apply for a payday loan
Payday Loan
The Average Profile of Customers Opting for a Payd
User guide to payday loan terminologies
Faxless Payday Loan Faxless Cash Advance Loan T...
Shopping For A Payday Loan
Payday Loan And Cash Advance Lenders Online How
Payday Loan Terminology
Why Payday Loans should be avoided
Cash Advance Payday Loans
Payday Loans Pros and Cons
The Truth About Payday Loans
What is a Payday loan
Short-Term or PayDay Loans
No Fax Payday Loans Online For A Fast Cash Advance
Things All Borrowers MUST Know About Payday Loans
go to Payday Loan index page
|
|
|