"Cash 'til payday..." The
ads are on the radio, television, the Internet, even in the mail.
They refer to payday loans.
Check cashers, finance companies
and others are making small, short-term, high-rate loans that
go by a variety of names: payday loans, cash advance loans, check
advance loans, post-dated check loans or deferred deposit check
loans.
If you're
going to take a payday loan, be sure you know how they work by
reading below. If you're ready to take one already, here are some
well-known payday loan providers, most of whom let you apply over
the Web and pick up money the next day:
Usually, a
borrower writes a personal check payable to the lender for the
amount he or she wishes to borrow plus a fee. The company gives
the borrower the amount of the check minus the fee. Fees charged
for payday loans are usually a percentage of the face value of
the check or a fee charged per amount borrowed - say, for every
$50 or $100 loaned. And, if you extend or "roll-over"
the loan - say for another two weeks - you will pay the fees for
each extension.
A cash advance
loan secured by a personal check - such as a payday loan - is
expensive credit. Let's say you write a personal check for $115
to borrow $100 for up to 14 days. The check casher or payday lender
agrees to hold the check until your next payday. At that time,
depending on the particular plan, the lender deposits the check,
you redeem the check by paying the $115 in cash, or you roll-over
the check by paying a fee to extend the loan for another two weeks.
If you decide
to use a payday loan, borrow only as much as you can afford to
pay with your next paycheck and still have enough to make it to
the next payday.
|
