Financial mistakes can have lasting effects that may take you years to recover from. Overspending on shopping trips, overusing credit cards and taking out payday loans are a few of the most common mistakes Americans make with their finances.
What is a Payday Loan?
Payday loans are also known as cash advances or paycheck advances. They are usually short-term loans that you must repay by the time you get your next paycheck. The lender charges you a fee, plus interest on the amount you borrow. Lenders do not typically run a full credit check for payday loans; another reason why they are becoming popular. Since the lender is taking a very large risk by loaning you the money, payday loans tend to have extremely high interest rates.
Disadvantages of Payday Loans
Some states do not allow payday loans at all. Of those that do, these states limit how high the annual percentage rate (APR) can be. Other states do not set restrictions on payday loan APRs. In these states, the APR can be anywhere from 300% to 900%. Although it is a very easy and fast way to get cash, you should be very careful when taking out a payday loan because you might end up paying more in interest than you originally borrowed.
When you take out a payday loan, you write a check for the amount borrowed plus a fee that will be cashed by the lender on your next payday. If you cannot repay it on that day, it rolls over to the following payday. Many borrowers get into trouble this way. If you continue to let the loan rollover, your debt substantially grows due to your inflated APR.
Alternatives to Payday Loans
Credit union loans – your local credit union may offer small, short-term loans to members.
Small bank loans – many small banks offer alternatives to those looking into payday loans.
Advances from employers – it may serve your best interest to ask for an advance from your employer instead of getting a loan that will accrue interest.
Borrow from family or friends – although it may put a strain on your relationship, this can be your best option because they will likely be lenient on the repayment date.
If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.