With the current instability in the American economy and uncertainty of what the future holds, many consumers are having to turn to other resources when they encounter an unexpected expense, or sometimes even to pay the monthly bills. But when the banks won’t loan any more money, the credit cards are maxed out, and the credit score is less than perfect, who can these individuals turn to for assistance? Welcome to the world of pay day loans. For those who can prove a stead source of income, even if they are unemployed, they may qualify for help.
Consumers everywhere are flocking to their local check cashing stores in search of a pay day loan. It is a fairly simple process to be entered into their system, but once you are in, getting a pay day loan is usually quick and painless. Pay day loan companies will want a photo ID and proof of income to enter an individual in their systems. Once this is provided, the typical range of money available is between $100 and $255.
What many consumers fail to realize is that pay day loans are not a long term solution, they are a quick fix. And they will cost you. A loan of $255, when paid back typically within two to 4 weeks, will require a $300 payback. That is a $45 dollar fee. If someone were to do this every two weeks for an entire year, it would cost them nearly $1200.
Are there larger payday loans available? The answer to this is somewhat foggy. Most cash checking stores will max out at a fairly low amount. But there are a great many on-line pay day loan companies that advertise up to $1500 in your bank account in as little as 1 hour. But is that really true?
The reality is that most pay day loan companies will not advance more than a few hundred dollars at a time. There are very few that will offer a larger sum but there are even greater strings attached on those. Most loans over $500 are termed auto re-financing, meaning that the loan is set for a short term of time and at the end of that period, the finance charge is added to the loan and a new loan is issued for the same period of time as before. If the consumer who has one of these loans does not pay more than the finance charge, they will never be able to reduce this loan. It will create a downward spiraling domino effect.
Other such companies exist online for a traditional type of loan, often with a much longer term, ranging from 24 – 48 months. However, with interest rates hovering at over 90%, these loans are an absolute last resort for anyone. To put it into perspective, a loan of $2500 could result in a payback of nearly $10,000.
At the end of the day, it is in each individuals hands to decide how to handle their finances. When used properly and with respect, pay day loans can be a helpful financial tool when there are no other options.
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