Payday Loans
A Warning About Common Misconception Regarding Payday Loans
It has to be said straight up that Payday Loans will normally have a much higher effective interest rate compared to any other loans. Sometimes the interest rates are close to credit card levels. This is because banks and lending institutions know that applicants are backed up to the wall and use payday loans as the last resort due to time constrains and lack of other loan options.
This option being the most expensive, I always advise clients to look at Credit Cards or Personal Loans before they decide to apply for Payday Loans. If all else fails then the most important thing to remember is that a Payday Loan must be paid off in full when you pay check arrives. It is simply too expensive to have a rolling loan arrangement.
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 which will often mean you are paying an effective interest rate of 20-30% p.a
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