|
The media has been telling people about how
easy it is to get a payday loan where you
can get an unsecured until your next payday. What most people do not realize
until it is too late is that a payday loan is actually a very
expensive form of credit. This article would therefore explain
how payday loans work and why they can be very expensive
for the borrower.
What Are Pay Day Loans
Payday Loans are unsecured loans which charge
high interest for short periods of lending. Many people
seem to flock to
them to tide over their credit card debts
until their next
payday thus the name. Other names for payday
loans include
cash advance loans, check advance loans or
deferred deposit check loans.
The Payday loan process
What usually happens when a borrower signs
up for a payday loan is that they write a personal
check to the lender for the amount plus a fee. The company then gives
the borrower the amount of the check less the fee. This
fee is usually a portion of the loan sum. Thus we can see that a payday loan secured
by a personal check is a very expensive form of credit.
A simple loan of $100 would cost you $115 for 14 days and depending
on your contract, it may then increase to $160 later
if you choose to roll over the loan. It would therefore
be prudent of the borrower to choose a lender of a payday loan
that charges you the least annual percentage rate (APR)
or in other words the cost of credit provided to you on a yearly
basis.
In conclusion, payday loans while popular,
represent a very expensive form of credit. If you should decide
on taking up a payday loan, you should consider spending
some time shopping around and looking for the payday
loan finance company with the lowest APR so as to reduce
the amount of fees you would have to pay come your next
payday.
About the Author
Learn about payday loans and debt reduction in our money making directory at http://www.MakeThousandsToday.info |
