Payday Loans: A Last Resort

When you don’t have any money and you need some fast, payday loans may be your only option in NC. The advantages to these kinds of loans are that they are available for just about anyone who has a job or other source of steady income and that they are fast. Additionally, you won’t need any collateral to secure one.

Typically, these loans are small and should only be used for emergencies. Most payday loan companies won’t lend you any more than 80% of your average pay, and you are expected to pay your loan back, with interest, on your next payday. The interest rates on these loans are quite high. The 10-14% interest on a typical short term cash advance ends up being the equivalent of about 300% Annual Percentage Rate.

Needless to say, most people don’t take out these kinds of loans if they have other options. If you can borrow money from the bank, a friend or relative or just about any other legal source, you’re better off doing so. But if your credit is hard up, a payday loan is an acceptable option as long as you don’t get in the habit of reloaning.

Reloaning is basically borrowing the money again, with another round of interest, until the next payday. The problem with this is that if you add it up, it doesn’t take long before you’ve paid more in interest than you borrowed in the first place.

Here’s how it adds up: Let’s say you borrow $300 with a 12% interest rate. That means you have to pay back $336 on payday. If you pay it off and walk away, you’re only out $36, which may be worth it in a tight spot. But if you reloan, you’re paying the company $36 every payday. Assuming you’re paid biweekly, that adds up to paying more than what you borrowed in just a little over 5 months (18 weeks). You may say that there’s no way you’ll still be borrowing for that long, but believe us, it can happen. If you do have to reloan, at least make sure to pay the loan down a little, borrowing less every time.

Most states have laws in effect that will allow you to pay off your payday loan in installments if you find that it has gotten out of hand for you. Be aware before you do, though, that it could affect your ability to use payday loans in the future. That said, though, it may be better than continuing to pay interest payday after payday.

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Know Your State’s Payday Loan Laws

If you’ve found yourself in the unfortunate position of needing to take out a payday loan, knowing your state’s laws can save you a ton of hassle and money. Most states require lenders to make borrowers aware of applicable laws, but all too often, lending agents skim over important details, or don’t mention them at all. Legally, as long as they have your signature and initials on all of the documents, there isn’t much you can do to prove they didn’t share pertinent information with you.

It’s not difficult to dig up the laws in your state concerning payday loans. Check here for a state by state rundown of the current laws regarding payday loans. The regulations are explained in simple, layman’s terms that just about anyone who reads this article should be able to understand.Know Your State’s Payday Loan Laws

Many states have caps on how much interest lenders can charge, and several others have provisions which allow for borrowers to get out of the cycle of reloaning by choosing to pay the loan back over a set period of time, more like a traditional loan. Of course, some of the lending companies will refuse to lend to you again if you do this, and this is their right. But, at least it offers you the opportunity to get out of a bad situation before it really gets out of hand.

Some states have outright banned payday loans, and others are considering legislation to do so. You’ll have to decide whether or not you think that’s a good idea. Our take is that regulations and limitations are necessary to keep some semblance of fairness in the payday loan industry, but outright banning them can also be harmful to people who need them: mostly the working poor when they are faced with an emergency.

It’s never a good idea to take out a payday loan that you don’t absolutely need. While the companies will advertise the loans as a great way to pay for a vacation, have extra spending money, or any other number of frivolous uses, common sense will tell you that paying high interest rates on a short term loan is a really bad idea except in a genuine emergency

Even then, you should pay off the payday loan right away. If you can’t afford to pay off the payday loan in one payday, you should really ask yourself if this is truly a matter of life or death. And if it isn’t, skip the loan.

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