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Payday Advances
Payday advances, (also known as “Payroll Advances,” “Quick Cash Advances,” “Cash Now Advances,” or “Check Loans”,) are short-notice loans given out (for a fee) to burrowers who need quick-cash to cover sudden expenses. The borrower then pays back the loan to the lender—and all applicable fees—when the borrower’s next paycheck arrives.
What makes payday advances attractive to many borrowers is that they are very easy to obtain. A borrower can go to a check casher, or even apply online for a payday advance, fill out a simple application detailing personal, employment, and bank account info, write a post dated check to the lender for money they wish to borrow and walk away with cash in hand that very same day.
There are no background or credit checks required. The fact that many lenders now allow borrowers to apply online and have funds deposited (and later repaid) directly from a borrower’s bank account, means that borrowers only have to go as far as their computer to obtain quick cash. If you know you are short on rent, or have a sudden expense that must be covered immediately, a payday advance can seem like the perfect solution.
However, there are some pitfalls to watch out for. Payday advances have a low ceiling; $300-$1,500 is all most lenders are willing to shill out. Payday advances also have extremely short repayment periods, usually 14-30 days, until a borrower’s next paycheck arrives. These types of loans also have extremely high interest and annual percentage rates (APR), meaning that a borrower will have to pay back more than they borrow, simply for the convenience of obtaining cash quickly. If a borrower fails to repay a payday advance when his next paycheck arrives, it gets rolled over into the next pay period and all service fees, interest rates and APR get factored in a second time. Since there is no legal restriction as to how high a service fee can be applied to payday advances, after just one or two defaults, a borrower can end up in a worse hole of debt than he was in before.
If you are going to try an obtain a payday advance, be sure that it is one of your last resorts, and be sure that your next paycheck will cover the cost of the advance and all applicable fees. Never borrow more than the exact amount you need to cover your sudden expense, and never take out a second payday advance on top of one you have not repaid. If you still need funds after taking out a payday advance, seek other options. And make sure you mark down the cost of the advance in your checking ledger as soon as you hand over that post-dated check to the lender. Don’t let sloppy math land you in hole of debt.
Finally, if you’ve already taken out a payday advance, budget your next paycheck accordingly. It is better to have to scrape your way through one reduced paycheck, than it is to have scrape your way through many down the line, when the cost of your payday advance has multiplied several times over.
Topics: Payday Loans |
