Avoiding Payday Loan Companies
We’ve all been there….that moment when you realize that you are not going to have enough money to make it to the next payday. It is a moment of panic…and any way out seems like a good one.
This is exactly the mentality that payday loan companies want you to have. Sure, they will loan you the money, it’s a relatively easy process, you walk out of there with cash in your hand…and extremely high interest rates to go along with it.
Most payday loan places do very limited credit checks, and you are very rarely turned down for bad credit. Indeed, these places are magnets for people whose credit score is lower than desirable. Banks and credit unions are a lot harder to borrow money from, and often require collateral or a co-signer. The only collateral a payday loan company requires is your post-dated check.
Along with the amount borrowed, an interest rate is tacked on to the total of what you will owe. My personal experience with payday loans involved borrowing the amount of $50…and in the long run, I paid back $116.00. This included the original $22 added to the amount borrowed, plus additional fees for getting the loan extended..another thing these places count on.
Avoid these places…however, if you end up going to one, be sure and pay back the loan on that next paycheck. A payday loan company survives on their interest collected…so they will make it sound like a good idea to extend the loan for another week or two by only paying back the interest on the loan. You still have the original amount to pay back…along with a second dose of that interest rate. They’ll keep it going for as long as you let them…so don’t fall into the trap.
Advance planning is the best way to avoid having to turn to a payday loan company. In these tight economic times, this may require trimming the budget somewhat. Put aside five or ten dollars out of every paycheck and keep it in a separate account from your household one. That way, when an unexpected expense comes up or the paycheck runs a little short one week, you won’t have to resort to borrowing money…and having to pay back twice what you borrowed.
Written by Angela Sangster, Copyright 2010 SaveMoneySpot.com
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Categories: Finance & Savings Tags: budget, loans