We are reminded of this payday loan option every where we go. There are advertisements on the sides of buses, on T.V. and even sitting in your email inbox.
So, when you are going through a tough time, and are tense about finding the money you need, this may seem like the quickest way to get out of the financial problem. In that moment it probably is the simplest solution. After all the advertisements say that you can have the money in as little as an hour. But what happens after that? What happens after you have paid whatever minor emergency you have?
Did you know that payday loans have an interest rate of almost 500%. This means that for every $100 you borrow, you have to pay about $15, and what happens if you should have to go over the term of the loan? What if you can´t pay the loan back in the fifteen day allotted time period? The payday company tells you not to worry, that they can extend the period of the loan, and even extend it as much as 6 months. But do you know that they charge you penalties for extending that loan and those penalties could be as much as another $15 for every hundred dollars loaned.
Before taking the easy way out and applying for that quick and easy payday loan you should look at other options. The Nations consumer protection agency suggests that consumers look for other loan alternatives before looking at payday loans, and if payday loans are the chosen loan, then consumers should only borrow as much as they need and pay it off immediately at the end of the loan term (in other words at the end of the fifteen day period).
There are other loan alternatives to the payday loan and these include, a credit union loan, a small loan company loan, a bank loan, or even a community organization, or family loan. These are all less expensive options to the payday loan and have the same loan term of fifteen to thirty days, or in many cases an even longer term frame.
The Credit Union - If you have an account at a credit union, they often offer small loans, so you should talk to them about their options.
The Small Loan Company - These are located in most communities, and are small financial institutions that offer loans form $100 to $500 for a period of one to six months.
The Bank - You might not even be aware of small personal loan options that your bank has. This is a new realm that many banks are starting to enter into.
A community Organization - Some communities have organizations, or lending clubs, where members pay a certain fee and have the right to then apply for small loans when the occasion merits it. Other organizations offer small business loans. Check with your Better Business Bureau to see if such an organization exists in your community.
The Family Loan - Even having to get up the courage and ask for a small personal loan from a family member is better than going to a payday loan option. Create a contract and make repayment arrangements before the loan is made.
These are all options that should be looked into before choosing a payday loan option. This is not to say the payday loan option is out of the question, but it is a very expensive loan and should only be used in dire emergencies, and even then, needs to be paid back exactly on time, to avoid receiving any other late fees.
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