Payday loans explained
What is a payday loan?
They are usually small loans that you take out until your next pay is due. The lender exchanges cash for a post-dated check and a fee for borrowing the money. On the date you specified on the check, the lender deposits your check and gets his money back.
How much is the fee?
It differs with each lender but is usually based on a percentage of the amount you borrow. The scary news is that this could be as much as 80% - sometimes even more – so make sure you check what this amount is before you take out the loan.
What happens if I need to extend the loan?
Then you’re going to pay hefty fees on top of what you already owe. Some lenders charge as much as 300% of your original loan so try to avoid this if you possibly can.
Are there any alternatives to a payday loan?
Consider asking your family for a small loan to tide you over until pay day or ask your employer for an advance. If you don’t want to do either of those things, approach your bank or credit union. You could also make a cash withdrawal on a credit card, and although this might seem quite expensive, it will be a lot cheaper than borrowing from a payday lender.