Payday Loans

There are literally thousands of payday loan providers. There are commercials everyday on the radio, television, on billboards, on-line and in newspapers and magazines. Even though there are some laws, these businesses are virtually unregulated which leaves a lot of room for adverse situations to occur. Although the loans are readily available, they are not a fiscally responsible thing to use. Beware, these type of loans can become overwhelming. The Truth in Lending Act requires full disclosure of the finance charge (the dollar amount) and the APR, or annual percentage rate (the cost of credit on a yearly basis.) To avoid disclosing very high interest rates, a lot of these lenders refer to the costs as fees.

According to numerous accounts, these institutions prey on the less fortunate who end up on a debt treadmill. They can’t repay the full amount of the principal, so they end up renewing the loan over and over again. Most payday lenders charge anywhere from 10% to 25% per week! That can really add up over the course of a year. Some states are trying to legislate maximum charges and repayment plans that will allow the payment of the principal over time, like a four paycheck period, so consumers don’t get stuck only paying for the interest on an on-going basis.

Predatory lending in the form of a payday or paycheck loan, also known as a cash advance is one of the most expensive ways to borrow money. Other expensive practices include using pawnshops, rent-to-own shops and check cashing establishments. There are other ways to borrow money that are much less expensive.

Only 1% of people who take out payday loans are able to pay it back and walk away. 90% of people who take out payday loans refinance at least 5 times per year and more than 5 million new people are trapped on this debt treadmill every year. If you are currently caught on this treadmill, don’t hesitate to seek help. Talk to your local Better Business Bureau, consumer protection agency to find out if there are any complaints against the lender and then contact a consumer credit counseling agency to see what your options are.

An alternative to all of the predatory lending practices, high check cashing fees, title loans and rent-to-own dilemmas would be to establish a relationship with your local bank, savings and loan or credit union. If you have an account , either savings or checking, at any one of those institutions you don’t have to pay to cash your paychecks or tax return check, you even have the option of having your checks directly deposited to your account! You can save money and actually borrow from these institutions at a more reasonable rate when necessary.

If you need a loan, avoid getting ripped off and get the best interest rate by checking with three lenders and comparing just how much it is going to cost for the loan. Check them out BEFORE signing any documents. Ask friends and relatives about any experiences they may have had with that particular lender. Check with the Better Business Bureau in your area to see if there are any recorded complaints. Check with local or state consumer protection agencies to see if they have any complaints on record. Ask a lot of questions. It may seem easy to get the money, but remember, it must be paid back. If you take good care of your money today, it will take care of you later on in life.

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