Payday loans have been receiving a lot of wrap lately and for a good reason - the financial charges on a typical cash advance are rocket high - up to $50 on each $100 borrowed. But while many states are rushing to the rescue of less than well-off citizens - this is the target population, arguably, that takes out payday loans, the basic market economy laws are telling us that payday loans can be beneficial in some cases. First, on the myths. According to the Payday Loan Industry Report, an average payday loan borrower's economic profile is far from what state legislators want us to believe:
"The estimates of income range from $20,000 to $50,000 for most borrowers. Some demographic studies indicate that nearly 50% of payday loan borrowers own their homes, and most have a high school education or more."
I am not trying to, in any way, rehabilitate payday loans: the facts are clear on the sky high interest rates charged by many lenders, as well as some shady practices that some lenders engage in: like taking money out someone's account as a result of shady marketing practices that make people click on certain offers they do not need or realize being signed up for. There are also various scams masked as payday loans in which personal information is being harvested and then used in identity theft and other fraudulent activities. At the same time, there are many people who take advantage of payday loans regularly to leverage their personal finances. The most important problem is how to educate people about payday loans. Questions like: "Can I afford a payday loan?", "Why do I need a payday loan?" must be answered before applying for a cash advance. After that, the place where to find the loan that best suites one's financial conditions has to be decided on. Let's focus on this second part.
It is clear that applying online can be very convenient - you do not need to run to a cash advance store, you can have your money directly transferred to your checking account overnight and you can pay off your loan conveniently online as well. But, which online loans are the best and where to avail them?
There are a few things that everyone has to be aware of when looking for a payday loan. These are: the amount, loan term, and loan cost. You have to be comfortable with the amount, loan repayment term and the financial charges. The repayment schedule is another thing to take into account. What we at Payless Payday Loans keep hearing is that people want to take out $1000 in payday funds. Well, you should stop right there before even going any further. You should not take out a $1000 payday loan because it goes against the very purpose of payday loans. These loans are not for plugging in every hole in your budget, they are for emergencies. And if you have an emergency that needs a $1000, you need to look elsewhere. The financial charges on a $1000 payday advance may amount to about $500. So, unless you can find a cheaper loan, just forget it all. It is possible to find a cheaper loan and it is also possible to find several cheaper payday loans if you need a larger amount. Taking time and applying is necessary to keep the costs down.
It is a good idea to go with direct payday lenders - you can see these payday loan lenders and choose direct trusted providers. You can apply to several lenders and see what they can offer in your case. You should pay attention to the terms and costs of each loan and accept it only if it won't entrap you in a debt cycle spiraling out of control. The term can be just two weeks or several months - an installment loan. Many direct lenders also offer an early repayment option so you can repay the entire loan early and save on interest charges. The cost of the loan may be high and the loanable amount low if you are a first time borrower. Thus, it makes sense to build a relationship with a lender over time which will ultimately allow you to borrow more and at lower rates. Finally, it must be said that there are no simple solutions when it comes to payday online loans, but the best piece of advice is to actually take time, compare different lenders and their offers and go with the ones that you can afford and repay on time without taking out yet another loan and falling into a debt trap.
This story was originally published on 07/03/2012.