Avoiding Payday Loan Dangers

So, what about your friends’ warnings? Yes, payday loans can be quite expensive. Interest rates are high—sometimes as high as 700% a year! You may also be charged other fees. But you can get around these by following the advice below. A little headwork can save a lot of headache.

• Trust only payday loan lenders with good reputations. Remember, you’re giving them personal financial information like credit card or checking account numbers so you want to deal with honest people. On the lender’s website, look for the BBB (Better Business Bureau) logo.
  
• Make sure you check the annual percent rate (legally, you must be told this) and shop for the best rate. 
  
• A few companies offer no interest loans to first-time borrowers. Find them. Be aware of the length of the loan and any other terms to help you choose the best payday loan lender. Be sure you know the total amount you’ll have to repay before you take the cash.
  
• Always read the fine print.
  
• Pay the web loan when it is due, on your next payday. The payday loan period may be extended, but you’ll have to pay additional (and large) interest and finance fees. Also, if you do not repay the loan with your next paycheck, the lender may even automatically renew the loan by withdrawing the fees from your checking account. This could cause you to be overdrawn and incur penalties from both the lender and your bank.
  

Meet Frank: A Real-World Payday Loan Story 

• Frank’s car broke down and he needed $300 fast. Panicking, he went online and chose the first web payday lender he found. He filled out the simple form and had his money in his checking account the next day to be repaid in a week. The fee was $30. 
  
• When payday came, Frank couldn’t afford to pay back the $330 so he asked for an extension, which he got for another $30. So the next payday Frank had to pay $360 for his $300 payday loan.
  
• If Frank continued doing this for a year, he would end up paying $1560 in fees. Most likely, the lender wouldn’t let the loan ride for that long. But this shows how expensive the payday loan fees really are, when you compare them with the interest on bank loans or even credit cards.
  

What should Frank had done?

Frank should have looked at more than one web payday lender, checking for the best terms and lowest interest rate.

After choosing a lender, he should have checked it out with the Better Business Bureau to be sure it is reputable.

He should have had a plan for repaying the web loan before he got the money so that he could have paid the loan on payday and not needed an extension.

So, how can you do better than Frank?

Payday loans or cash advances are lifesavers for short-term, small cash problems. With thought and care, you can solve your temporary money problems quickly without making your long-term financial situation worse. Start your search for a great payday loan at the following websites.