Personal Finance Tip – The Awful Truth About Payday Loans

Understand what a payday loan is. Payday loans are short-term loans given to people in a cash crunch. The lender may charge an interest rate or a flat fee per hundred dollars borrowed.

One of the sad pieces to this credit card puzzle is that when the rates change, they are effective immediately and will apply to whatever balance you have. The long-term credit option just jumped in cost. Unless you have the money to pay off that balance, your monthly minimum payments will go up and the principle will be slower at going down.

Another option is to borrow money from someone you know, but then you run the risk of the deal going badly and miscommunication and then you end up losing a friend in the process. It is just awkward to borrow money from people you know.

Usually people are confused since they are used to bank loans. They see the APR in comparisons to bank loan without considering the nature of both loans. Payday loans are personal loans with a short-term commitment. Lenders will only lend a small amount, usually one third of your pay. Due to this very nature of the payday loans, their annual charge become gigantic despite the fact that these loans are not expensive when viewed in the right time-frame and amount borrowed.

The biggest problem with these loans is that they have a very high interest rate. Their excuse is that it is because you are borrowing the money for a very short time. The average rate of these loans is usually 300% APR. Because of this you will actually end up owing more in interest than what you borrowed in the first place. Many people will end up having to extend the loan, which will cause them to go more in to debt than they were when they went to the loan company.

click here for no third party direct payday lenders rarely do a credit check; if they do it is for reference only. The approval rate for payday loans is actually pretty high. Payday loans aren’t typically written for more than $1500 or $2000 because of their use as short-term loans.

Confusing as it may be, all financial institutions need looked through for proper practices. It isn’t just the little cash advance lenders who are misleading the public. You can view their policies. If you don’t understand the math, talk with a customer representative and ask. If the company is not willing to explain their policies, well then that problem should b solved easily, hang up.

Finding a bad credit payday loan once you lose your credit score is more difficult and even costlier. It is however important to note that it is bad choices that lead to poor credit scores. Always make a point of screening the terms before you sign for any loans. If you get a low fee payday loan, your chances of servicing it in good time are higher. This will not only help you solve your financial problem but also improve your credit scores. There are many companies that can offer an easy payday loan and you should look around before signing for a high interest loan.

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