A Payday Loan is Last Resort Credit Option!

I ran across a Michelle Singletary article on the Washington Post website which does a fine job of discussing the very tough spot payday loans can put people in. I am pasting a few paragraphs below:

"Payday loans are small loans (usually $ 100 to $ 500) that a borrower promises to repay out of his or her next paycheck, typically in two weeks. Fees charged for payday loans are usually a percentage of the face value of the loan. For example, if someone wanted to borrow $ 500, the fee might be 15 percent ($ 75)."

"Consumer groups complain bitterly that payday loans are an extremely bad deal because they carry high fees that, when annualized, amount to triple-digit interest rates. In many cases, if borrowers cannot repay the loans, they are allowed extensions -- for additional fees. Then they are charged even higher rates of interest."

She goes on to comment about Clark Howard who runs a consumer website and states, "Stay away from 'pay day loans!"

Ms. Singletary goes on to describe Clark's background in the matter: Clark recently had the privilege to testify before a legislative committee that is considering enacting a "pay day loan" statute. 'Pay day loans' are high-risk loans that people take out to tide them over until pay day. They anticipate being able to pay the loan back after pay day. But the interest rates are so high - typically 300 percent and higher – that it starts a vicious cycle and consumers get more into debt each time. These loans have been banned in several states already because they are so damaging and because there are no regulations in the industry. "Clark thinks the marketplace should determine what rates should be, as is the case in the credit card industry. About 17,000 soldiers have taken out pay day loans and, as a result, they could not serve overseas. Taxpayers paid money to train those military personnel and it was basically a waste because the soldiers were too financially strapped to be deployed. If you have taken out these kinds of loans in the past, STOP. If you have family members in the military or in emergency services fields (police and firefighters), find out what kind of loans they've taken out and help them make good choices. We have to watch out for each other when it comes to these kind of loans, which are also known as cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans."

If you remember anything from this article, remember this. Never take a payday loan online without being totally sure that you will be able to pay the entire payday loan plus interest back at the due date. Why? Because rolling existing online payday loans can be a disaster financially. Please always borrow responsibly.

If you apply for payday advance, please only borrow what you will be able to pay back when you get paid from your job and still have money to get through the month.