Payday
Loans
(For Paying the Mortgage)
Fact: Payday
loans are advertised everywhere it seems. Payday loans are
also poor for your pocketbook. For quick cash, many will
resort to payday loans to "tide me over 'til payday."
But, payday loans come with a steep interest rate. Some
payday loans will come with interest rates as high as 400
to 500 percent, depending upon whether you roll them over
from one payday to the next.
Most payday loans
are arranged so that a borrower writes a post-dated check
to the lender, for say 2 weeks. When the 2 weeks are up,
the payday loan is cashed, which includes the predetermined
interest.
Because of the
Federal Truth in Lending Act, the lenders must disclose
the interest charged to the borrowers and finance charge.
Let's say for example that you take out a payday loan for
$500 for two weeks and pay the lender $75. You'll write
the post-dated check out for $575, receive immediate cash
of $500 and at the end of two weeks the lender will cash
the check. The interest rate on this loan comes in at a
whopping 391-percent annual percentage rate. There may be
an additional finance charge as well.
Before you decide on
the quick fix that payday loans offer or get yourself in a situation
that your alternatives are few, consider a loan from a credit union
or small lender, employer, family member or even a cash advance
from your credit card vendor. Most people who resort to payday loans
do so time and again, so a little planning for a cash crisis may
help avoid the steep interest rates.
If you continue to get
a payday loan fix, then start making additional plans to
get off the wagon. Talk to your creditors for more time
to pay bills. Get overdraft protection for your bank account.
Make a budget
and stick to it, factoring in a little extra personal cash
for impulse buys. If you believe you have been defrauded
by your lender for unscrupulous practices, then file a complaint
with the Federal
Trade Commission. The FTC helps prevent fraudulent,
deceptive and unfair business practices and help the consumer
avoid such places of business. On the other
hand, you may be in a bind and need the instant cash that
payday loans provide and are confident that paying them
back will not be a problem. Paying a mortgage on time may
be one reason.
There are many
sources for payday loans online that can help you get out
of your cash bind. Remember, though to take the time to
choose carefully and comparison shop since as a consumer
you do have many choices in lenders.
Fiction:
Payday loans are a great way to pay the mortgage (sarcasm
just doesn't transfer well into print). For example the
annual interest rate on a payday loan is a gazillion dollars.
A recent unofficial poll states that a gazillion is larger
than a bazillion even though both are fictitious numbers.
So, if you want to pay a gazillion dollars, go into bankruptcy,
lose your home and then go into the witness relocation program,
by all means use a payday loan to pay your mortgage.
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