A payday loan is a short-term loan that can help you meet your immediate cash needs until your next paycheck arrives. These small-dollar, high-cost loans typically have annual percentage rates (APRs) in the triple digits, and payments are usually due within two weeks—or close to your next payday. This article will provide some insights into payday loans.
Short-term Loans
Payday loans are short-term and must be paid back on the next payday. Most borrowers postdate their checks to the next paycheck and authorize the lender to withdraw money from their accounts. These loans carry an interest rate of between $15 and $20 per $100 borrowed. These rates are calculated on an annual percentage rate (APR) and range from 391% to 521%. For this reason, it is essential to understand the terms of Payday Loans Daytona Beach FL before applying for them.
A Quick Way To Get Cash
If you need cash quickly, a payday loan can help. Payday loans can be used for various purposes, including covering the cost of medical bills or emergency food. However, they have a high-interest rate, so people should consider alternative methods before taking out a payday loan. Alternatives to payday loans include small savings accounts, extended payment plans with creditors, and loans from friends, family, churches, or social service agencies. A credit card is another viable option, although cash advances on credit cards typically carry a 5% or higher fee.
Popular With People With Little or No Savings
While payday loans may not be for everyone, they are a convenient alternative for many who don’t have much cash saved up. Payday loans report no activity to the major credit bureaus so they won’t increase your credit score. On the other hand, personal loans can be taken from a bank, credit union, or online lender. Though most personal loans are unsecured, those backed by collateral may carry lower interest rates. According to a U.S. News survey, people commonly use personal loans to consolidate debt. Others use them for large purchases, such as vacations or home improvements.
Require Pre-authorized Electronic Withdrawals From a Bank Account
Some payday loan lenders require pre-authorized electronic debits from your bank account. These withdrawals cover the interest and principal, but you can be charged additional fees if you do not have enough money in your account. Ask your lender for more time if necessary, and find out if there are any late fees or finance charges. If you still cannot make the payments, consider working with non-profit financial cooperatives and community development credit unions. They often offer small-dollar loans at affordable interest rates.
Once you’ve agreed to the pre-authorized withdrawals, you can stop them by writing to the payday lender. In addition, you should notify your bank to block all future withdrawals from your account. If the payday lender refuses, you can also report the unauthorized transactions to your bank. Again, it’s essential to keep copies of the documents.
