What is Payday Loans?
Payday loans are small loans that you can use when you are temporarily out of money.
Most often, payday loans are short-term loans (two weeks or so) for a small amount of money (a few hundred dollars). To get a payday loan, you usually write a check for the amount you borrow, plus the fee. You can leave a check with the lender and they will charge it as soon as you are ready to repay.
If you can’t pay off your payday when it comes, you can sometimes «flip it» to extend the loan. You don’t need to return it, but the fee keeps accumulating. Some States regulate rollovers — either prohibiting them or limiting the number of times you can extend them.
Payday loans are sometimes sold as «no credit» loans. You don’t need good credit scores (or any credit history), and getting «approved» is easy compared to more traditional loans. As a result, they are popular with people facing financial difficulties.
The cost of payday loans
In General, payday loans are extremely expensive.
As a result, you pay an annual interest rate (APR), which can be several hundred percent. For example, you can pay $ 20 to borrow $ 100. 00 for two weeks. The American consumer Federation has some good calculations comparing payouts to money to alternatives. They show that you would pay about 426% per annum for a payday, but paying an APR of more than 1000% is not unheard of.