Fraud Tip of the Day - March 1
Payday Loans come with a price
A variety of financial companies offer short-term, high interest loans often referred to as payday loans. They are also known as: check advance loans, cash advance loans, post-dated check loans or deferred deposit check loans.To get one of these loans you write a personal check payable to the lender for whatever amount you want to borrow, plus a fee for the service. The lender then gives you the amount you wrote the check for minus the fee. The fee is usually a percentage of the face value of the check or it's pegged to the amount being borrowed.
If you for some reason are unable to pay back the loan and need to extend, or roll-over, the loan you have to pay the original fee for each extension of the loan. Think about this for a moment.
A Cycle of Debt
If you need a $500 loan and the loan amount is 15% the check you wtite will be for $575If you need an extension you have to pay an additional $75 (The 15% fee). Now you've paid $150 to borrow $500!
If you need two more extensions and pay another $150, you have paid a total of $300 to borrow $500.
Payday Loans Target the Poor
As you can see, the fees add up quickly. What's so sad is that the companies offering these loans target those that can least afford them. Payday loans should never even be an option. If you need a loan try your credit union, a small loan company that doesn't offer payday loans, ask your employer for help or go to your family and friends.Anytime you think a payday loan is your last resort remember how the fees add up. If you need the money that badly, you certainly can't afford to throw it away.
