Beware of “Payday” Loans

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If you have expenses and are short on cash, it’s all too easy to find yourself in a perilous financial situation. According to data from the CFPB, each year, more than 12 million Americans take out quick “payday” loans and spend a whopping $9 billion annually in loan fees.

Make no mistake, if you need cash, you need cash. Your options are definitely limited, but there are a few methods of obtaining quick cash you should avoid at all costs.

Payday Loans are Dirty

The most financially prudent way to get quick cash is certainly not via a payday loan. What most consumers don’t understand about payday loans is the high origination fees behind them. Usually payday loans are due in just two weeks, and they are tied to your paycheck cycle. However, two weeks is not a long period of time to pay down a loan, yet fees and interest will mount up faster than you could imagine.

Upon taking out a payday loan, it is not uncommon to actually end up paying far more than the original loan principle via interest! Payday loans might be necessary or helpful for true emergencies when you need cash desperately, but it is always sound financial advice to avoid them at all costs. The fees and interest are no joke.

Cash Advances are Stuffed with Hidden Fees

Another option to obtaining quick funding in times of need, cash advances from credit cards, aren’t too much better than payday loans. In fact, they’re pretty similar. The hidden cost with cash advances, besides the 25%+ APR, are the fees that your credit card company will likely charge. This is in addition to any fees the ATM or cashier will charge as well.

Depending on the size of your cash advance, these fees could be hundreds of dollars on top of what you borrow. Worse, the high APR for cash advances applies to the full borrowed amount. Meaning, you’ll pay interest on the money charged to you in the form of fees. Cash advances are truly a lose-lose situation.

Final Thoughts

Without question, the easiest way to get out of high-interest debt is to not get into it in the first place. Although there are plenty of reputable personal loans with low interest rates, they often require high credit scores to qualify.

Any loans that advertise quick funding with little or no requirements to qualify are likely to be a better deal for the lender than the borrower.

Post by Options Bro


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