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Author:
Joel Teo

What are Payday loans and how they can be very expensive

By Joel Teo

All Rights Reserved 2005

The media has been telling people about how easy it is to
get a payday loan where you can get an unsecured until your
next payday. What most people do not realize until it is too
late is that a payday loan is actually a very expensive form
of credit. This article would therefore explain how payday
loans work and why they can be very expensive for the
borrower.

Payday Loans are unsecured loans which charge high interest
for short periods of lending. Many people seem to flock to
them to tide over their credit card debts until their next
payday thus the name. Other names for payday loans include
cash advance loans, check advance loans or deferred deposit
check loans.

What usually happens when a borrower signs up for a payday
loan is that they write a personal check to the lender for
the amount plus a fee. The company then gives the borrower
the amount of the check less the fee. This fee is usually a
portion of the loan sum.

Thus we can see that a payday loan secured by a personal
check is a very expensive form of credit. A simple loan of
$100 would cost you $115 for 14 days and depending on your
contract, it may then increase to $160 later if you choose
to roll over the loan. It would therefore be prudent of the
borrower to choose a lender of a payday loan that charges
you the least annual percentage rate (APR) or in other words
the cost of credit provided to you on a yearly basis.

In conclusion, payday loans while popular, represent a very
expensive form of credit. If you should decide on taking up
a payday loan, you should consider spending some time
shopping around and looking for the payday loan finance
company with the lowest APR so as to reduce the amount of
fees you would have to pay come your next payday.

About the Author
Learn about payday loans and debt reduction in our
money making

directory at
http://www.MakeThousandsToday.info

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A Quick Note From The Publisher... If you like the article above, you may be interested in the following article which is also related to Payday Loans... Top 10 Helpful Hints in Getting Payday Loans Payday loan can acts as a helping hand at the times of unexpected financial crisis. It is obvious that an immediate car repair or a medical bill may affect the financial balancing. Even though it has certain limitations, obtaining payday loan will become essential to manage the situation. Payday loan are referred as cash advances or check loans. One of the major advantages of payday loan is the instant approval of loan amount. However, adequate knowledge about the payday loan is essential for the quick processing of the loan. The following 10 hints will help you to have an understanding about the requirements for the payday loan. 1. Payday loans are short term loans, which have to be remitted back on the next day of the payday. You have to give the lenders a postdated check, as the assurance for the repayment. They will collect the money from your account using the check on the due date. It is attractive since it does not require any other collateral security or a good credit report. 2. The primary eligibility requirement is that you must be 18 years of old and must possess a checking account. You must be employed for the past five months or at least up to 90 days. The monthly income must be $1000. But some payday loan companies are lenient to allow loans to persons having a monthly income of $800. 3. Most of the payday companies boast that they do not require any credentials for the loan approval. But they will give you the amount only after strict scrutiny. Even though most of the companies have more or less similar terms and rates, intensive search will help you to identify the most convenient deal. 4. Online payday loan companies have made the payday loan processing very easy. You need to just fill in the online application and they offer the...