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.