An Alternative to Payday Loans
The interest rates offered by pay day loan company's makes a credit card company look like a not-for-profit organization. And those who offer no checking account pay day loans can be even worse.
So what can you do instead of a pay day loan? Some banks offer "Overdraft Privilege" or similar programs. These allow you to pull out $300 or more from your checking account, through an ATM... Even if you don't have the money in your account. So let's pretend that you have 10 cents in your checking account, and you have to make your $250 car payment. Your getting paid in a week and you'll easily be able to cover the car payment. So, you pull $300 out of your checking account, resulting in a $25 overdraft. You pay the car payment, and within 30 days (hopefully within a couple days!) you deposit $325 into your checking account, bringing your checking account back to 10 cents, and saving you from a late payment on your car! The same loan would cost over $50 for a 14 day loan from a pay day advance company, and you have 30 days to repay the loan to your bank, as opposed to the company's 14 days.
Some lenders will allow you to pay a small fee in order to make a late payment, and the late payment will not show upon your credit history, making it to where you could avoid the payday advance, and where you would not need a checking account with overdraft privilige.
If you must use a payday advance, find the lowest interest rate possible. Average interest rates for such loans is about 400% APR. Only borrow as much as you can safely pay back, with interest, on your next payday, while still being able to make it to the following payday. DO NOT get caught in the act of using pay day advances, they should not be use more than once every 2-3 years.
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1 comment:
I've had to use payday loans once. It wasn't that bad for me. Yeah there was a fee, but I didn't have any where else to turn to.
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