If you’re almost out of money and it’s a week or longer before your next payday, it can be very tempting to get one of those payday loans. I can empathize because when I was younger there were many times when we had more month left than money and getting one of those payday loans seemed like a good alternative.
How payday loans work
Payday loans are very short-term loans. In fact, they are generally just for a few weeks. To get one of them, you simply write a check for the money you want to borrow, plus the fee that’s charged by the payday loan company. You are given the money just as if you had cashed a check, except the loan company holds it and then cashes it your next payday. In the event there is not enough money in your account to cover the check, the lender usually just extends the loan and charges you an additional fee.
It’s expensive and risky
The biggest problem with a payday loan is that it’s a very expensive way to borrow money. It’s possible that you could have a huge APR (annual percentage rate. For example, if you were to pay $20 to borrow $100 for two weeks, your APR would be about 426%. Plus, these loans are risky because you may be giving the payday loan company the right to get into your checking account, which could open the door to fraud.
The other danger
The other danger of payday loans for debt relief is that it’s very easy to roll one into another and then into another until you suddenly have multiple loans to worry about. There are numerous people have had to turn to credit counseling services when they found they had run out 10 or more of these loans and could simply see no way to pay them off.
Better alternatives
Probably the best alternative to a payday loan is to create an emergency fund so if you were to have an emergency, you could tap the fund and borrow the money from yourself. Or you could turn to consumer credit counseling before you got into trouble with payday loans. There is likely one in your area. If not, there are many of them available via the Internet. Before you choose an agency, make sure that it’s a nonprofit and that it provides its services either free or at very low cost. Many of these agencies offer their help free because they are backed by lending institutions such as the credit card companies and banks – that have learned it’s better to help people get out of debt than to see them file for bankruptcy.
What happens with credit counseling
You will have a counselor who will review all of your finances, including your income, debts and your budget. He or she will help you craft a plan to pay back your debts and will then approach your creditors and negotiate to get your interest rates reduced and for them to accept your plan. If all of them sign off on your plan, you won’t be paying them any longer.. Instead, the agency will pay your creditors and you will pay it monthly until you finish your plan. This will take about five years.
Legitimate debt relief
Legitimate debt relief is what we do through programs of debt settlement. The way this works is that we negotiate settlements with your creditors, probably for about half of what you owe. Because you will owe less, you can get out of debt faster – probably in 24 to 48 months. We charge no upfront fees so you have nothing to lose by giving us the opportunity to settle your debts. Call us today for more information.
