Payday Loans -- Worth the Cost?

Let's face it a payday loan is a high interest short term loan. So just like every other financial decision you must make sure that your payday loan is at a lower interest rate than your other source of funds. In some cases the optional source is a NSF or credit card late fee or utility re-connectr fee which also are very high interest if you look at the additional fees in that light.

A payday loan or paycheck advance is a small, short-term loan (typically up to $1,500) that is intended to bridge the borrower's cashflow gap between paydays. Payday loans are also sometimes referred to as cash advances, though that term can also refer to cash provided against a prearranged line of credit such as a credit card.

The loan is typically given in cash and secured by the borrower's post-dated check that includes the original loan principal and accrued interest. The maturity date usually coincides with the borrower's next payday. On the maturity date the lender processes the check traditionally or through electronic withdrawal from the borrower's checking account if the borrower does not first repay or service the loan in person.

Payday lenders typically operate small stores or franchises, but large financial service providers also offer variations on the payday advance. Some mainstream banks offer a "direct deposit advance" for customers whose paychecks are deposited electronically. When a consumer requests the direct deposit advance they receive a predetermined, small cash advance. On the next direct deposit into the consumer's bank account that advance amount is removed by the bank plus a fee for the advance (usually around 10-20%). Income tax preparation firms including H&R Block partner with lenders to offer "refund anticipation loans" to filers.

In the United States, most states have usury laws which forbid interest rates in excess of a certain APR. Payday lenders operate in those states by funding loans through a bank chartered in a different state. Under the legal doctrine of rate exportation, established by Marquette Nat. Bank v. First of Omaha Corp. 439 U.S. 299 (1978), the loan is governed by the laws of the state the bank is chartered in. This is the same doctrine that allows credit card issuers based in South Dakota and Delaware — states that abolished their usury laws — to offer credit cards nationwide. (Wikipedia)

Check out the articles here. They can provide more insightful information and help you decide whether a payday advance is the right option for you.

Sample Writings

A payday loan is a cash advance on your paycheck for usually up to 50% of what you will earn. There are many lending agencies that offer this service and more are springing up online as well. Between the Internet and the telephone system, you can have money directly deposited into your account in no
Continue . . .

Cash advances have become quicker to process with online payday loan applications. In as little as a minute, you can be approved for a cash advance and have the money in your checking account the next day. Cash advances can save you from life's sudden financial emergencies.Payday Loans Or Cash AdvancesPayday loans go by several
Continue . . .

If you've been through a foreclosure, bankruptcy or divorce - you've noticed that your credit score has taken a dive. When you apply for a loan, be it a car loan, home loan or personal loan - creditors look at your FICO score. Your FICO score is an indication of how you've handled lines of credit in the past.
Continue . . .