OK, lets say you’ve got a financial emergency. For whatever reasons, you need money fast. You look into your bank account and realize that you don’t have enough cash in your account to cover the financial emergency.
You panic at first. Maybe, you ask a few people to lend you some money and they’re tapped out too. Your credit cards are maxed out and your credit score is very low. Put it this way. Your credit is so bad that Credit card and bank employees will run and hide if they see you coming.
Maybe someone tells you or you hear about payday loans and/or cash advances. Don’t get me wrong, this may be the only option for people with terrible credit and a need for fast cash. But, you should know that when you apply for a payday loan, your credit score is not considered. The most important thing to get a payday loan is to have a minimum monthly income.
Each loan company has different requirements and a different way to verify information that you provide to them. If you are approved, than your funds will be directly deposited into your checking account. And, on each payday, your checking account will be directly debited a specified amount until you pay off the loan.
Now, lets talk about the ugly side of these loans.
Direct debit – All payday loans are required to be paid back by directly debiting your checking account every payday. They will continually debit your account even if you only pay finance fees. It only will end if you call and ask to debit your account an extra $50 until the loan is paid off.
Finance fees – This is the worst part! You will be paying $30 for each $100 on each payday. This is the typical finance fees. Lets say you borrowed $400 You will pay $120 each payday. That’s only finance fees. You are supposed to pay the full amount back plus the finance fee by next payday.
So next payday comes around and you still don’t have the full amount to pay back the loan. Your forced to pay that finance fee. This may happen a few more times until you can finally pay off the loan. In the end, you will have paid the loan off many many times over already. It’s a big shame that people that are in financial need have to be treated this way because of their bad credit history.
Bottom line: If you need to get a payday loan than pay it off as quickly as possible. And, try to start a saving plan for emergencies in the future.