Payday Loan Dangers

By: Alex Sparks, TV

In an emergency a payday loan can be a great resource to get you out of a tight spot. This loan is almost like borrowing money from a friend, ..almost. There are no credit checks and the loan is due on your next payday from the date you borrow the money, essentially making this a 2 to 4 week loan. The catch is you pay a $15 - $30 fee for every $100 dollars borrowed, which means the interest rate on this type of loan can be upwards of 400%.

For example if the loan company charges $20 for $100 and you borrow $200, on your next payday you will owe $240 dollars. There is no grace period with this type of loan, so if you choose to rollover this loan until the following payday the fees are charged again and you will then own $280. Most lenders also charge an additional fee for the rollover.

As you can see this type of advance can have a snowball effect in which can be very hard to stay on top of if you are not careful, especially if you are already living paycheck to paycheck. You should only use this type of loan when you have no other choice and always, always pay it back on your next payday.

Again, in an emergency this can be a life saver, but if you are not careful this can be the monster in your wallet.

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