The following is a guest post
Payday loans can seem like a good idea if you’re short of cash one month. Whether you apply for a payday loan at a cash advance outlet or online, the process is generally the same: you show your pay stub and driver’s license, fill out a quick form and walk out with cash in hand.
Most cash advance outlets have you write a check for the amount you wish to borrow, plus a fee. This could mean writing a $250 check for $200 in cash. That’s a large interest rate. When your two weeks are up, the cash advance outlet will either cash your check or allow you to bring in the lump sum so you can take your written check back and tear it up.
The problem with payday loans is that if you don’t have the money now, you probably won’t have it two weeks from now, which can lead to some serious consequences. There have been true stories of people racking up hundreds of dollars in payday loan fees because they’ve gone from one cash advance outlet to the next when they discovered they couldn’t pay off the original loan.
Since it’s so easy to jump from one cash advance outlet to the next, it’s easy for payday loans to prey on anyone who finds themselves up against the wall with no other options. Cash advance outlets also lend to high risk borrowers because they know that people living paycheck-to-paycheck are more likely to pay huge interest rates and fees when times get hard. What’s worse, anyone who needs a deferment on their payday loan will face bigger charges.
It seems like a nice idea for cash advance outlets to make extensions when you cannot pay the money back in 14 days, but that’s something that works in their favor, not yours. Even one loan extension will result in another interest charge. Multiple deferments could end up costing you hundreds, if not thousands, of dollars.
Most payday loan amounts have a limit and many states only allow you to borrow $400 at a time. Tellers may also be instructed to pressure you into borrowing the maximum amount because the company will make the most money from charging you interest.
If you have bad credit, look into other options before resorting to a quick payday loan. It’s true that most loans for bad credit will come with higher interest rates if you are approved with bad credit, but they will probably be better than a cash advance. Read the fine print associated with any loan before signing on the bottom line. This goes for cash advances, personal loans, pawn shop loans and any other agreement that would charge you money to borrow money. Don’t panic and become a cash advance outlet jumper if you do take out a payday loan. Going from one outlet to another will only put you further in debt instead of solving your financial problems. Look at other options, such as taking a cash advance out on your credit card. There are fees involved, but these are minimal compared to payday advances.
And always ask yourself if the “emergency” can wait until payday.