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Tuesday, February 24, 2009

Is A Payday Loan A Solution?

By Hugh Grapling

If you go around the Internet to look for quick cash, you'll soon find numerous payday loan companies. Right now, there are over 10,000 payday loan businesses in the US alone. If there's not one near you, you don't have to look hard to find one online.

You will find the advantages listed everywhere. A payday loan is quick first and foremost. You can get through the application process in less than 20 minutes, you can get the money within a day. That's quick cash.

Most people use a payday loan to plug an unsuspected hole in their budget. Many times, an unexpected expense came up, and it needs to be covered quick. A payday loan beats asking a friend or a relative for money in that situation. But before you complete your application, you have to know that you'll be able to pay the payday loan off in time.

The payday loan companies are not in business to give you financial support in tough times. Like all other businesses, they need to make a profit. They do this by charging interest. In the case of payday loans, pretty high interest.

Many bureaucrats have uttered their disapproval of the payday loan business. They profile payday loan companies as 'predators', and say that they prey on the unsuspecting consumer. The main complaint is that the interest rates of a payday loan can reach very high levels, even higher than credit card debt. The interest rates really kick in when you're forced to renew or extend your payday loan because you can't pay it off in time. When you do this, your interest rate usually doubles up. If you do this a few times, it can end up costing you about $ 50 in interest to get a $ 100 payday loan.

A payday loan can be a solution, but only if you're careful about the deadline. Make sure you pay it back in time, or the high rollover interest rates ramp up very fast and you may find yourself even deeper in the hole.

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