Bad Credit Payday Loans...

Beware Of Bad Credit Payday Loans
Written by: Jeff Schuman

Could bad credit payday loans be the answer consumers with low bank
accounts have been looking for? Is there any harm in using these
services? Aren't they better than using credit cards or going
hungry?

Have you seen the commercials? Cute characters promise financial
prosperity. Happy, professional individuals appear to regularly
visit their corner pay day loan shop as proudly as cashing a
check at the bank. Customers at the grocery store all recommend
pay day loans as the easy solution for a lack of funds.  

WHY USE A PAY DAY LOAN? 

Some individuals reason that paying a bill with borrowed money is
better than receiving bad credit marks because of not paying the
bill. This is understandable. However, some financial
institutions are willing to make the occasional exception if
contacted about the situation. Or there may be a small fee, but
not a credit report made. 

Using it for groceries or other items? Consider the true cost
before making a decision. Compare the cost of using a pay day (or
cash advance) loan to the fees charged for taking a cash advance
on your own credit card. Can family help? Often those who are
forced to use pay day loans are not able to repay the loan by the
next pay check and that can lead to a cycle of debt and stress. 

WHAT IS THE COST? 

Several sources, including a consumer report by the FTC (Federal
Trade Commission) and the CFA (Consumer Federation of America)
state that usual the usual APR is between 350 - 650% with some as
high as 780%. 

A loan of $100 ranges in cost between $15 - $30. If the loan is
not repaid by the pay date then it can be renewed with another
fee due at each renewal. A loan of $100 can cost $60 in fees
after 3 renewals. 

WHO BENEFITS? 

Based on the warnings issued by federal and consumer
organizations it is clear that using pay day loans or cash
advances from these businesses can often lead to more debt and
problems. Some sites were reported to automatically roll over the
loan and only withdraw the renewal fee on the pay date. Other
sites surveyed by the CFA required customers to agree in contract
to not participate in class action suits or to file for
bankruptcy. 

For those who are having debt problems it is recommended to seek 
no- or low-cost credit counseling from a local non-profit
organization. These organizations can help with reducing current
interest charges and lowering monthly payments. If the problem is
budget, you should look to a financial planner who can help you
to manage the money you do have and avoid using credit at all.

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