Pay Day Loans and Interest rates
Alternatives to payday loans
Pay day loans are a simple and easy way to borrow money. As long as you have a bank account and a regular job pulling in over $1200 a month you can borrow cash and pay it back on pay day. The problem with pay day loans is that they are an expensive way to borrow. Their APR’s can work out at over 400 percent and if you miss payments, and start to ‘rollover’, then costs soon start to mount up.
According to the U.S. Treasury Department the number of check-cashing stores has doubled to roughly 5,600 since 1986 and industry estimates predict 600 percent growth during the next decade. This clearly demonstrates that payday loans are a lucrative and expanding business, but it is one that makes its money by charging sky high interest rates. Financial advisors warn people against using them, but what’s the alternative?
If you think you might need to borrow funds; the first step is to sit down and work out how you can cut expenses. Make a realistic budget and try to stick to it. Start with non-essential spending: cancel your dinner dates and steer clear of bars and clubs for a few weeks; you’ll be amazed at how much you can save.
If you’re going to use credit then exhaust all the alternatives before taking out a payday loan. A standard bank loan will normally have a much lower APR than a payday loan, plus you’ll find it easier to pay back. Credit cards also often work out to be a much cheaper way of borrowing. Alternatively you can see if a credit union will lend you any money as well or you can ask your employer for an advance.
If you do decide you’ve no alternative then make sure you pay back your payday loan in full at the first opportunity. Do not allow your loan to build up over time as it will increase exponentially and soon spiral out of control.