Payday Loans

Let’s imagine for a moment that last month you had a financial emergency when your car broke down and needed a repair that cost $1500. This wiped out your entire savings account and your entire paycheck. You had just enough in your checking account to cover the checks that you wrote for your electric and phone bill, but now you have no money left for you and your three kids to eat this week or gas money to get back and forth to work this week. You will not get paid again until next Friday, what in the world are you going to do? Then you remember about the payday loan company that is down the street deciding to go there for help. Everything seems great, you only wanted to borrow $200, but the loan officer said you qualified for $400, so you agreed to take the full $400.

I am sure this situation or one similar to this one has happened to most of us at least once. If it is at all possible, avoid the assistance of a payday loan company, unless it is unavoidable. If the situation causes you to get a payday loan, then get as little as possible to minimize your finance fees.

When you get a payday loan, you will postdate a personal check for the amount of the loan, plus whatever finance charges you owe for borrowing the money, for either a week or two weeks. The finance charges are extremely high, sometimes as high as 800%! The payday lenders prey on borrowers to get trapped into the vicious cycle of not having enough money to pay the loan off in full when it becomes due therefore, they need to keep renewing the loan to stay in good standing. There comes a point when borrowers will get a loan from another company to pay off the first company and so on. Then they get to the point where they can’t pay their bills and are only working to pay for these payday loans.

The best advice for borrowers that are in this situation and desperately need to get out is to go to your bank and pay the fee that it costs to stop payment on the check that you wrote to the payday loan company. Then contact the loan company and explain that you stopped payment on the check and you would like to set up a payment plan. At this point, the manager may or may not want to work with you. If the manager works with you great, then agree to a plan that you can stick to. If the manager does not work with you, you will need to wait until your account enters the collection stage within the loan company.

The best tip to follow when it comes to payday loans is not to take one in the first place. These easy loans come at a huge price!