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Saturday, 25 November 2006

Payday loans

Payday loans are short-term advances that are due on your next payday, unless your next payday is 4 or less days away from your loan date - in that case your loan will be due on your second payday. Hence, the maximum loan term is 16 days. Payday loans are available from nationalpayday.com and others. Payday loans short-term advances intended to be paid off quickly - so they're really only suitable for SHORT TERM cash flow requirements. The loans involve a standard fee of $25 per $100 loaned, so the effective APR values are not really relevant - you're getting 75% of your pay in exchange for receiving it in advance, and have to pay off the full amount when you get your pay check. Thus you should really only use such loans in an emergency, hopefully in order to avoid pay even higher fees elsewhere.

For example, you might need an emergency cash advance via a payday loan to avoid eviction, avoid hefty late payment penalties and higher interest rates on your CC debt, or other emergency cash requirements. Sometimes it can be more expensive to source funds for apparently cheaper sources - for example, although the APR rate for a personal loan or bank overdraft facility may be lower, there may be an establishment fee that ends up higher than the $25 per $100 charged by nationalpayday.com. There can also be costs associated with setting up a bank overdraft facility that is seldom used, either a monthly admin fee or a charge based on the overdraft limit, even when not in use. For these reasons, it can sometimes be more economical to make use of a payday loan for emergency cash requirements, even if you were able to source funds from another source. One other potential benefit of a payday loan from nationalpayday.com is that they don't make a credit check when you apply - so this might mean that your credit rating doesn't suffer from a hard credit enquiry.

1 comment:

Ginny Crandall said...

Thank you so much for the information! I am still trying to understand exactly how instant payday loan companies work. Isn't their loan process fairly simple? How will it affect my credit? Thanks for the help!