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Payroll Advances
Payroll advances, (also known as “Check Loans”) are short-notice loans given out (for a fee) to borrowers 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 payroll 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 payroll 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 for payroll advances 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 payroll advance can seem like the perfect solution.
However, there are some pitfalls to watch out for. Payroll advances have extremely short repayment periods, usually however days or weeks are left until a borrower’s next paycheck will arrive. 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 payroll advance when his next paycheck arrives, the loan is 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 specific legal restriction as to how high a service fee can be applied to payroll advances, after just one or two defaults, a borrower can end up in a worse hole of debt than he was before.
If you are going to try an obtain a payroll advance, be sure that it is one of your last resorts, and be sure that your next paycheck will definitely be enough to cover the cost of the loan and all applicable fees. Never borrow more than the exact amount you need to cover your expense, and never take out a second payroll advance on top of one you have not repaid. If you still have mounting expenses after taking out a payroll advance, seek other options. Whenever you apply for a payroll advance, make sure you mark down the cost of the loan in your checking ledger as soon as you write that post-dated check to the lender. Never let sloppy math put you in a hole of debt.
Finally, if you’ve already taken out a payroll advance, know that you have an impending debt to repay and 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 payroll advance has multiplied several times over. Bite the bullet and pay off the loan as soon as possible.
Topics: Payday Loans |
