The Advantages and Disadvantages of Cash Loans

Nowadays payday loans have become relatively popular and in fact, it would seem that everywhere you turn there would be an offer for a payday advance to get you some extra money you need till the next paycheck. Are payday advances truly a good idea? Indeed, they can be a rescue when you are in a tight spot financially but there are a few serious aspects that must be noted before you actually apply for such a loan.

First, let's take a thorough look at how payday loans really work. Generally the payday company would want to loan you a small sum of cash for a small period of time. For example, let's pretend you urgently need $200 dollars to pay some unanticipated costs. You can get the $200 dollars and bring along a postdated check for two weeks hence to cover the principal amount of the loan plus the commission, which would be about $50 for this size cash loan. So, in 2 weeks the payday lender is expected to be able to cash this check for 260 dollars.

Prior to taking out the payday loan, it is immensly important to stop and decide for yourself whether you will ever be able to afford to fully pay back the loan payback date. Most payday advances are made on a 2 week to 4 week basis. In case you can't pay the loan on the repayment date most cash loan lenders will be ready to extend your loan ; however, if you somehow do that they will charge more fees.

That makes for one other point as it can be not easy to calculate how much interest you must pay on a payday loan when it involves numerous paydate extensions. If truth be told, depending on the number you extend the loan you may well be paying 250% interest. Since there is no statutory standards concerning the amount of commission charged on cash loans when they are extended in this manner. As you can well guess, with this kind of interest rate, you might never manage to repay your payday loan. Depending on the number of times you go on rolling over the payday, you might simply end up running into massive debt. If, for some reason, you extended the payback date three months after the original paydate you would have to pay almost $500 ; twice the amount you initially received.

There might be a few other problems emerging while availing a payday. For example, if you are unfortunate to be working with a company that is less than diligent this might result in your having not enough money to pay back the loan on your payback date. This can be a serious problem if the payday company cashes your postdated check prior to the payback date or if you don't have enough money in your bank account to pay back the loan.

When all those aspects are taken into account, payday advances might be a huge risk and should only be considered if you actually have no any other solutions, such as obtaining a traditional loan from your credit union or bank, borrowing from family or close friends or just wait some time until you receive your future paycheck.