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Payday loans are unsecured, short-term loans that are typically due on your next payday. They are also sometimes called cash advances or check loans. Payday loans can be a very costly way to borrow money.
The cost of a payday loan depends on the fees charged by the lender and the length of time you need to borrow the money. The typical fee for a two-week payday loan is $15 per $100 borrowed, which translates into an annual percentage rate (APR) of almost 400 percent! In comparison, credit cards typically have an APR of around 15 percent.
The Risk of Payday Loans
Not only are payday loans expensive, but they also carry a high risk of default. This is because the loan amount is often much higher than what the borrower can afford to repay on their next payday. As a result, many borrowers end up renewing their payday loans multiple times, which further increases the fees they owe.
What's more, if you default on a payday loan, you may be subject to aggressive debt collection practices, including wage garnishment and seizure of assets. In some cases, borrowers have even been sued for not repaying their payday loans!
The Alternatives to Payday Loans
Fortunately, there are other options available for those who need financial assistance. Some alternatives to payday loans include:
1. Borrowing from friends or family members.
2. Using a credit card.
3. Getting a personal loan from a bank or credit union.
4. Finding other sources of financial assistance, such as government benefits or charities.
The cost of a payday loan depends on the fees charged by the lender and the length of time you need to borrow the money. The typical fee for a two-week payday loan is $15 per $100 borrowed, which translates into an annual percentage rate (APR) of almost 400 percent! In comparison, credit cards typically have an APR of around 15 percent.
The Risk of Payday Loans
Not only are payday loans expensive, but they also carry a high risk of default. This is because the loan amount is often much higher than what the borrower can afford to repay on their next payday. As a result, many borrowers end up renewing their payday loans multiple times, which further increases the fees they owe.
What's more, if you default on a payday loan, you may be subject to aggressive debt collection practices, including wage garnishment and seizure of assets. In some cases, borrowers have even been sued for not repaying their payday loans!
The Alternatives to Payday Loans
Fortunately, there are other options available for those who need financial assistance. Some alternatives to payday loans include:
1. Borrowing from friends or family members.
2. Using a credit card.
3. Getting a personal loan from a bank or credit union.
4. Finding other sources of financial assistance, such as government benefits or charities.