Payday Loans can be Too Hot to Handle
Payday loan outlets are becoming as common as convenience stores. These loan companies
typically charge fees every two weeks for the service. The service can end up costing
an annual interest rate of 300%, 700% or even 1,000% according to the Cincinnati
Post.
People who do not have a savings account, credit card or good credit history might
try this type of loan. But because of the very high fees many people will get deeper
into debt and it may be almost impossible for some to pay off the principal.
A consumer gives the lending company a postdated check for say, $100 plus a fee
of maybe $15. At the end of two weeks, the borrower has three options: 1) pay back
the amount in cash, 2) let the lender cash the check, or 3) get a loan from a second
company to pay down the first debt.
A better plan is never to start with these kinds of loans. Reality says, “If you
don’t have the money today you’re not likely to have the money tomorrow.” Pay for
things in cash and don’t borrow against your future!
Source: Associated Press