When you Google the words "payday loans" or cash advances", thousands of sites offering this kind of low cost financing seem to mushroom out of your computer monitor. It is the kind of loan trending that is unstoppable unless everybody agrees that one cannot really get the best deal out of payday loans.
Paid advertising that boast of fast loans and cheap rates may sound too good to be true at the outset until later you realize later that it is just that-it is really too good to be true. Payday loans will never be cheap. Understanding this is possible through simple math.
Payday Loans
Let's say you are a borrower who needs 100 dollars for an emergency purchase at home. A lending company offers you the best deal they've got and proposes a quick loan processing time, less documentary needs, and a cheap interest rate. Sounds good right? You readily sign the documents and issue a check (which you know you can't possible pay within two weeks, but, hey, it's just a small sum, you can find money to pay for it when the time comes, right?).
Let's say you are charged 30 percent of the loan amount as the interest. That is 30 dollars every one hundred dollars, right? So for the 100 dollar loan, you actually will be paying one hundred thirty dollar after fifteen days.
The fifteen day period expires and you are unable to pay. You request for an extension and the loan is "rolled over". The interest rate piles up and you have no choice but to borrow more to cover the debt. In the end, you pay more than a hundred percent of what you borrowed plus an outstanding balance for the new loan you made from another lending company to pay the first loan that you incurred. You are now wading knee deep in loans and financial crisis.
This type of lenders prey on low income households and communities which they knew have no capability to pay the loan. Payday loans can not be found in communities which they know can readily pay the loan amount after the prescribed fifteen day period. They get their profits from the extensions that they get due to the borrowers inability to pay. As it is, Payday loans prey on those who do not know what they are getting into.
There are many alternatives from making payday loans and these include making personal loans from friends and family, pawning items at pawn shops which in a sense is you are actually selling something to the pawnshop if you are not able to pay for the pawned item. In this way, at least, you are getting your moneys worth.
What You Get Out of Cash Advances Is Not Cash at All
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