An interesting article was found at WalletPop about some loans that people take and really should avoid if at all possible. These loans include payday loans. Payday loans are short-term loans that range from $300 - $500. You have probably seen the payday loan businesses set up in a strip mall. Usually, to qualify for a payday loan, you need to have a checking account and a pay stub (or other verifiable income source, like Social Security). You write a check for the amount borrowed plus the interest. The payday loan company will then hold your check. Should you fail to pay the company back, they will cash the check.
The goal is to pay your loan back on your next payday. It would make sense if you have an emergency and had no credit line left on your credit card (which you are hopefully in the process of eliminating). You usually have the opportunity to renew the loan if you cannot pay it back. The problem is that you will be charged a fee anywhere from $10-$100. Continue on this course of action, and you could be looking at 400% interest.
That doesn't make sense.
If you needed to borrow a hundred dollars, that would be similar to doing so, but having a $400 payment due after a year. Not worth it.
Think carefully about taking out a payday loan. There are better alternatives out there, even if it means borrowing money from friends or family (strongly discouraged as well).
Have a GREAT day!
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