Payday Loans - When there is no other choice ~ Make Money Fast - The Million Dollar Experiment Down Under

Wednesday, June 27, 2007

Payday Loans - When there is no other choice

Payday loans can help you to get money in a hurry when you need it however there is a price that is paid for this....

What exactly are Payday Loans?

Payday loans are short term loans, for example if you want to borrow $200 until your next paycheck the lender will electronically deposit $200 into your bank account and come payday or due date you will need to pay them $250 (the $200 you borrowed plus a $50 fee).

When that date arrives, either you pay the full amount, or some lenders may allow you to roll over the amount by paying a fee to extend the loan for another two weeks.

What's wrong with Payday loans?

There is some ill-feeling around about payday loans from those who believe that borrowers end up being in a worse position after taking the loan and can end up becoming trapped in a never ending spiral of debt.

The interest rates on Payday loans are very high, however it must be realized that they (the lenders) are lending money to people that may have bad credit and have nowhere else to get the money from. This is a high risk investment for the lenders so understandably the fees need to be substantially higher than what a bank loan would incur.

How to avoid Payday loans

  • Budget ahead of yourself, by planning ahead you should be able to spread your wages until next payday
  • Avoid unnecessary expenses - if you don't really need something don't buy it. If you can't afford to drink and smoke you should think about saving money here as well!
  • Keep a Clean Credit record - this way you will be able to get loans at lesser interest rates if necessary and avoid paying the high fees of payday loans
  • Get an overdraft on your bank account set up before you need it
When to get a Payday loan

If you need a cash advance fast to avoid penalties, or perhaps avoid repossession of property and the cost of the loan is less than the damage or fallout from not paying then you are a prime candidate for a Payday loan. You may have exhausted all other avenues - family or friends are unable to help you out and you can not get a short term loan from a bank or other lower fee lending establishment.

It is important to not become trapped into continually borrowing money week after week, so ensure that once you have got over the problem that you are facing, pay the money back in full and try not to get into the same situation again.