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When you’re strapped for cash with nowhere to turn, taking out a payday loan may seem like a great quick fix option. But what most people don’t realize is that pay loans are usually the beginning to a vicious cycle of “catch up”. The borrower usually takes out a certain amount of money and in return they have to forfeit that portion of their paycheck. Because the borrower is already strapped for cash to begin with, they end up needing to take out another loan just to cover the amount they just lost.
Before ever taking out a payday loan, here are 4 things about them that you need to know:
- They are usually for small amounts. This means you can only borrow anywhere between $100 and $1,000. This of course, will depend on income level and state laws.
- They are due by your next paycheck. Unless you work something out in advance with a payment plan, you will likely have to pay the entire amount back– plus interest, by your next paycheck.
- Lenders usually need to have access to your checking account. In order to ensure that you keep up with your end of the bargain, lenders may require you to have a checking account.
- The loan usually costs anywhere from $10 – $30 for every $100 borrowed. That means if you borrow $300, you are likely to pay back anywhere between $330 and $400.