If you need money and your next paycheck is a week or two away, a personal loan, payday loan may be your only option. Yes, it’s fast and you’ll get the cash you need, but all in all it’s just a temporary loan for people with bad credit. Also known as cash advance loans, these “quick fixes” may seem like a solid answer, but there are many underlying tricks that are wrapped up in payday loans. The average loan is between $100-$500, which may not seem like a lot of money, but the interest payday loan companies charge is how they get you. The Federal Trade Commission has regulated the interest on payday loans; however, different states have their own individual laws. Some states have little regulation, some monitor them heavily, and some outlaw them altogether. Tricky advertising and the thought of having that money in your pocket right away may persuade you to get a payday loan, but know what you’re getting into first.
- Having bad credit leaves you with few options
If you need fast cash, but payday loans could make things worse. Here’s a quick scenario: if you need to borrow $100 and will pay it back in two weeks, you must give them a post-dated personal check with that amount plus an estimated $15 fee. If you miss the payment, they will extend it for two weeks and add another $15 in what the industry calls a “roll-over”. Roll-overs are the way payday loan companies make their money, and if you do it a few times you’ll be paying a high amount of fees for a low amount of money. This is turn will affect your everyday expenses and may lead to more bad credit, so here are a few alternatives to payday loans: - Create a sensible budget and save
Whether you have bad credit or not, avoiding a payday loan altogether is the best alternative possible. Write down what you spend, and you’ll be surprised how little items like a snack or coffee add up. By putting this money away you’ll have that little amount you may need in the future at hand, and you can prevent paying big interest on a small loan. - Shop around
See if your bank offers small loans to their customers. Even if you have bad credit, if you have a solid history with your bank they may accept the loan. There are also small loan companies available, plus cash advances on your credit card, but make sure you look into the details before you agree to anything. - Compare rates
Having bad credit may only offer you high fees and interest, but by putting these prices side by side you can find the least expensive option. What you need to look for is the loan fee, interest, finance charge and the APR. All of these add up in the end, and chances are you’ll find an option better than a payday loan.
Having a bad credit score can affect you in many ways, but don’t get into a situation that can make matters worse. Payday loans are tempting due to their money in your hand appeal, but in reality they fall under the context of, too good to be true. And in the case of payday loans, that usually IS the case.
