| A Payday
Loan Is a Costly Option for Quick Money Need a cash advance quickly to tide you over until payday? Many consumers take advantage of payday loans or short-term loans that are repaid from the next paycheck. But beware: the fast money typically comes at a high price, according to Debra Bartman, University of Illinois Extension consumer and family economics educator. Payday loans go by a variety of names: cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans. Many businesses offer these loans at an exorbitant rate to consumers who need some money to get by until payday. Bartman explained how they work. For example, on Feb. 1 you need $200 cash, but your payday is in two weeks, she said. The lender agrees to give you the loan with a $60 service fee. You then write a post-dated check for Feb. 14 for $260. The lender will give you $200, and hold your post-dated check. To repay your loan, you redeem your post-dated check with cash or money order, or the lender deposits the check. If you decide to extend or roll-over the loan, you'll be charged and additional fee. This type of loan can be rolled over two, three or more times before coming due. The real cost of the payday loan is the amount of money you must pay to obtain the loan. Based on annual percentage rates, you may be paying as much as 2,000 percent interest for using this type of loan, Bartman said. Payday loans may sound like a good source of quick and easy cash, Bartman said. But the truth is these types of loans may push you further into debt. Before choosing a payday loan, look at other options. Can you borrow from friends or relatives? Perhaps you can delay paying a non-interest bill such as a utility bill, and make payment arrangements with the utility company instead of taking out a payday loan.
Take a look at your entire financial situation. If you don't have money for emergencies, consider carefully the reason you haven't saved. You may want to talk with a financial counselor about solving your money problems. Consider how you might start an emergency fund so that you won't need to rely on payday loans in the future. From:
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