Payday Loans and Check Cashing Alternatives
A Payday Loan is a small, short-term loan at an extremely high interest rate, usually a cash advance loan secured by a personal check. These services may also be known as check advance loans, post-dated check loans or deferred deposit check loans.
The finance company charges a fee to the borrower as a percentage of the checks value. If an individual writes a personal check for $115 to borrow $100 for 14 days, that $15 “fee” is equivalent to 391 % annual interest.
“Rolling-over” (extending) the loan past the original agreement can incur greater fees. If rolled over 3 times, the above example equates to paying $160 to borrow $100.
Alternatives
Explore small loans from a credit union, bank, employer, family member or friends. Always shop around for the best interest rates and terms, as well as the lowest penalty fees.
Consider the necessity of the loan. Try sleeping on it. You might be able to come up with a solution that doesn’t involve using a payday loan and could end up saving yourself quite a bit of money in the long run.
If you have any questions, would like to discuss your financial challenges, or are just looking for advice, please contact us at your convenience. As always, we are here to help and look forward to hearing from you.
1-877-OUT-DEBT (688-3328)
Debt Reduction Services and the National Financial Education Center
Financial Educator, Facilitator, Lecturer, Speaker
A Certified Personal Financial Counselor, Todd Christensen, M.A. is Director of Education for the non-profit National Financial Education Center at Debt Reduction Services Inc, served as President of the Idaho Financial Literacy Coalition from 2006 until 2009, and was asked in 2009 to serve on the Council for Certification of the American Association of Family and Consumer Sciences.
With all the uproar of the payday lending lawsuits nowadays, many forget that you will find a lot more to these loans than just giving cash to people with high interest. New Mexico has filed a lawsuit against Fastbucks, the sort of lender claiming they have made unconstitutional loans. The fact remains, these people going to these loan companies are often high risk, and often can’t get a loan anywhere else. By being labeled as high-risk, they are a liability to lend to, and if the loan companies do not get their cash back they’ll go out of business; so often the rates of interest are only to sustain their business. Regardless of why individuals take out payday cash advances, this can be a major reason interest rates are high.