The Cost of Payday Loans

You need a cash advance immediately, but are too shy to ask
relatives or friends, and are scared of the paperwork involved in a bank
loan. Shed all your worries, for help is a mouse click away in the form
of payday loans. Payday loans are one of the most convenient ways of
getting a cash advance today with practically no paperwork or other
hassles.

Defining Payday loans

Payday loans are a short-term
cash advance, when it is needed the most…usually between paydays!
Payday loans are a great way to get some cash to tide you over to your
next paycheck. The goal of payday loans is to assist you with finances
to meet that unforseen requirement. The money is given as a cash advance
and is directly deposited into your personal checking account, after
which the cash advance funds, plus a fee, are taken out of your account
at the end of the loan which usually is your next payday.

However,
a payday loan is no substitute for long-term financial planning. This
cash advance should only be taken to meet urgent financial needs until
your next payday. It is only in emergencies that payday loans come in
handy. Payday loans also bail you out of situations of bounced checks
and late payment penalties by making the appropriate cash advance
available.

Understanding The Cost Of Payday Loans

Forewarned
is forearmed! So it is with payday loans. If you know what this kind of
cash advance will cost you, you will be in a better position to weigh
the pros and cons of opting for it. This way you will also know exactly
what amount you need to pay back to the payday loan companies.

Your
first step should be to find out the best rate of payday loan on offer.
Whichever payday loan company you may choose you must know what will be
the fixed amount that you will owe upon completing your payday loan.

Usually
most payday loan companies charge around $20 to $30 per $100 of cash
advance. To ensure that there are no ambiguities, insist that your final
payday loan amount is spelled out in dollars and cents. This will help
you know what you need to pay, when your payday loan is due.

To
judge the best deal, go for the payday loans company that is offering a
lower APR. Usually, most payday loan companies provide a cost-breakdown
per 100-dollar increments that coincide with the rate.

Furthermore, most payday loan fees are based on the
duration of the cash advance. The standard APR for most companies falls
into the 400 percent range. As an example, suppose you were to borrow
$100 at a fee of $20 for a 2 week period and if you did not pay if for a
year, your service charge would be $520 for a 520% APR. To which you
need to remember to add the original $100 that you borrowed.

There
may be a situation where you are unable to repay the full amount of the
cash advance to the payday loans company. In such a situation, the
payday loans company generally charges the payday loans finance fee and
defers the principal payment over a longer period of time, usually
another 14 days.

The Other Hidden Costs

There are several
hidden costs in a payday loan! Remember, if you are unable to pay this
cash advance and you happen to lose your job, the clock does not stop.
If you default on the cash advance, which includes the principal plus
interest, the payday loan company will reclaim the entire amount plus
all the interest accrued on this loan. A payday loan company may
exercise a number of options to collect this cash advance:

�Sue you for the funds.

�Use a collection agency.

�Enter your details into a bad credit database which may limit your capacity to cash/write a check for commercial purposes.

�File a legal complaint for bounced-check charges that may leave derogatory information on your credit file.

By
now, it should be clear that it is not prudent to go for payday loans
without being aware of the repayment structure. To play it safe, make
sure that the cash advance is repaid on time to the payday loans
company. Read the fine print before you sign the agreement and
understand the worst-case scenarios before deciding to take a payday
loan. Once you understand the costs involved in obtaining a cash
advance, you are a step nearer to fully enjoying the benefits of payday
loans!