Credit Card or PayDay Loan?
A lot of buzz online these days about payday loans…
- Makes me wonder, could pay day loans be the answer that consumershave been looking for?
- Could there be any harm in using these services or is it all risk free?
- Are these services better for our financial state than using a credit card?
PayDay Loans – What You Need to Know
Some may tell you that paying bills with borrowed funds (credit) is better than receiving a bad credit mark or rating because of not paying the bill on time. As a general rule, this is acceptable reasoning, however, many financial institutions are more than happy to accomodate an occasional late payment if contacted and the problem explained. For this excuse/example/reasoning there is little need to get a payday loan just to make a payment.
Do you need the money for groceries or other staples? You might have solid reasoning for these types of cash needs, but first weigh your options. And you do have options if you own a credit card. Compare the cost of using a cash advance service loan to the interest charges for cash advances on your credit card – you may just discover that your credit card offers a substantial savings! You might also be able to borrow from a friend, coworker or family member to get you over the mini-crisis without losing money on service fees or accrued interest charges.
How Much Does it Cost Really?
A few online research sources – a consumer report by the FTC (Federal Trade Commission) and the CFA (Consumer Federation of America) state that usually APR on payday loans is between 350 – 650% with some as high as 780%.
That calculates to loans of $100 ranging in fee costs between $15 – $30! If the loan is not repaid by the pay date then it can be renewed with another fee due at the renewal date. A loan of $100 can easily cost a borrower $60 in fees after just 3 extensions.
Are There Better Options?
If you’re in the midst of a tough time financially, experiencing debt problems, or finding that you can’t make the paycheck stretch into the next week, it may be time to seek some low-cost credit counseling. They will help you to reduce your current borrowing charges, counsel you on budgeting and spending habits and quite possibly assist you in getting monthly payments lowered.