Payday Loans Should Only Be Emergency Alternatives
By Charles Hopkins
Published 10/23/2007 | Finance
Payday loans should only be used as an emergency cash alternative. If
you find yourself in a situation that leaves you considering a payday
loan, ask yourself if there is any other possible way to make it
through to your next payday.
There are cash advance businesses set up all across America. Heres
how they work. Youll take your most recent check stub (or stubs,
depending upon the business requirement) to the business as proof of
income. Youll be asked to fill out some paperwork, including the
amount of money you need and when is the date of your next payday. On
that next payday, you will return to the business to repay the amount
of money plus interest and fees on the sum. If that payment is not made
on time, late charges will begin accruing. While most loans are for
periods of 14 days or less, the interest rate can break down to more
than 400 percent given the time frame.
The reason payday loans are recommended as a last resort, is that
if you are running short of money one payday, it is likely that the
setback of repayment will leave you in the hole again. This can easily
leave you with the temptation to get yet another payday loan, thus
beginning a cycle that is not easy to break. This kind of rollover is
not a good situation to be in and may even be illegal in your state as
a protection to you, the consumer.
What if you have no other option? Ask yourself if youve tried hard
enough to think of other alternative possibilities. Can you call your
creditor and ask for more time to pay your bill? Most will work with
you when you explain your circumstances to them. Is there a friend or
family member from whom you could borrow the money? Maybe you could ask
your employer for a payroll advance.
The bottom line is: try to avoid a payday loan. If you really do
feel like its your only option, educate yourself on your states laws
and legal opinions about the cash advance businesses. Make sure you
have a plan to guarantee you wont get caught in the viscious loan
cycle. Most of all, try to get some financial counseling to help you
develop a budget for managing your income and your expenses.