Payday Loan or Costly Quick Cash?
The payday loan advertisements are on the international radio, television, the Internet, even in the mail. They refer to payday loans - which come at a very high price.
Payday loan check cashers, finance companies and others are making small, short-term, high-rate loans that go by a variety of names: payday loans, cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans.
Typically, a borrower writes a personal check payable to the payday loan lender for the amount he or she wishes to borrow plus a fee. The payday loan company loans the borrower the amount of the payday loan check minus the payday loan fee. Payday loan fees charged for payday loans are usually a percentage of the face value of the payday loan check or a fee charged per amount borrowed - say, for every $50 or $100 loaned. And, if you extend or "roll-over" the loan - say for another two weeks - you will pay the fees for each extension.
Due to the Truth in Lending Act, the cost of payday loans - like other types of credit - must be disclosed. Among other information, you must receive, in writing, the payday loan finance charge (a dollar amount) and the annual percentage rate or APR (the cost of credit on a yearly basis).
A payday loan (cash advance loan secured by a personal check) - such as a payday loan - is very expensive credit. Let's say you write a personal check for $115 to borrow $100 for up to 14 days. The check casher or payday lender agrees to hold the check until your next payday. At that time, depending on the particular plan, the lender deposits the check, you redeem the check by paying the $115 in cash, or you roll-over the check by paying a fee to extend the payday loan for another two weeks. In this example, the cost of the initial loan is a $15 finance charge and 391 percent APR. If you roll-over the payday loan three times, the finance charge would climb to $60 to borrow $100. Payday loans are becoming an international problem as well. Consult counseling if you have problems with payday loans.
|
|
|
