Loading ...Much of the criticism aimed at payday loans is that they come with extraordinary APRs. But if we break down the cost of getting a payday loan versus incurring late fees, overdraft charges and other expenses, it soon becomes clear that payday loans may actually be a smart financial move for consumers in need of a short-term loan.
The Financial Facts. To compare the true cost of a payday loan, it is important to examine the facts:
- Overdraft fees charged by banks often far exceed the APRs of payday loans.
- Payday loan fees are often much less than late fees and over-the-limit fees charged by credit card companies.
- Payday loans are often the only solution for consumers who are unable to obtain credit.
- Payday loans are paid back within a short period of time (usually within one to two weeks), thereby eliminating long-term finance charges.
- Payday loans, because they require no credit check, are processed in just a few days (or often less).
The Savings Associated with Payday Loans. If we also examine the real cost – or savings – associated with payday loans, we quickly see that payday loans are often a smart alternative to:
- Overdraft charges
- Bounced checks
- Cash advance fees on credit cards
- Late fees
- Utility shut-off
- Eviction
- Foreclosure
- Vehicle repossession
For many consumers, payday loans come in the nick of time. For example: if your electric bill isn’t paid, your power may be disconnected. If you can’t afford to pay your car repair bill, you will have no transportation to get back and forth to work (which can result in a loss of income or a loss of your job). If your rent isn’t paid, you could be evicted. If you have no spending money, your daily living expenses, such as groceries and gas for your car, can’t be managed. And if you can’t afford the deposit on an apartment, you will have no place to live.
In conclusion, it is important to realize that although payday loans come with their share of fees and interest charges, they may allow us to eliminate other types of charges and fees and avoid inconveniences and emergency situations.
It is up to us, as consumers, to educate ourselves any time we need to secure short-terms loans; and this holds true for payday loans too. Don’t sign any agreement you don’t understand and make it a point to check out the loan’s terms and conditions before you enter into an agreement with a payday lender.
Related Articles
Leave a reply