A “payday loan” is usually a small loan taken out in the amount of your next paycheck. They are short term loans with very high interest rates, usually used by people with very poor credit or in an emergency.
The payday loan will give you a specified amount, usually less than your next paycheck will be for, but then require you to sign your next paycheck over to the payday loan company as soon as it is received. The extra money is considered interest on the loan and usually very high.
Where do I get a payday loan?
There are many payday loan companies in the United States, some are even chain stores for payday loans. Most are located in strip malls that are highly visible from the street. It’s important to pick a reputable payday loan company if necessary, never go with a fly by night vendor.
Make sure they are legitimate and insured. Read over their paperwork carefully before agreeing to any payday loan. It may be helpful to visit more than one payday loan store to see if you can get a better interest rate on your loan.
Should I take out a payday loan?
Since payday loans are a very bad investment with usually obscenely high interest rates, payday loans should be a last resort. Remember that if you take out a loan now, when your next paycheck comes, you will not have access to that money. If you depend on your paycheck to pay rent, utilities or to buy food, where and how will you pay for these living expenses?
Taking out a payday loan to pay back another payday loan is never a good option and can lead to real financial trouble. Visit a free credit counseling service in your area to see what can be done.
What do I do if I can’t pay my payday loan back?
If you have taken out payday loan and realize that you do not have the money to pay back the loan, you will need to seek help immediately. These loans usually tack on excessive interest rates for every day a payment is late, so ignoring the problem can only pull you deeper into debt.
The best option is to call the loan company and ask for an extension on the loan without interest or at a reduced interest rate. If you are deeply in debt, visit a free credit counseling service to see if your debt can be reorganized or even a bankruptcy attorney to determine if bankruptcy could be a good option for you. Never just default on a loan, this can ruin your credit score and destroy your financial future.
