Everyday, brilliant writers across the global are struggling to make ends meet. Most of them will take on part time jobs in an attempt to balance the books while others will turn to more risky forms borrowing.
Payday loans can also be called as small cash advances. Payday loans can help you in emergency when there is no other means of money available to you. The loan amount is usually less than $500. The borrower gives the lender a postdated check, or a debit authorization mandate. The lender will deposit the check on the payday of the borrower and hence the name payday loan. The cost of the payday loan depends upon the interest of the loan. The procedure to apply for a payday loan is very simple and there are numerous companies (such as this one) which provide instant payday loans to the consumer.
The cost of the payday loan will depend on a number of factors. Each company offering the loan will charge some fee towards the loan. The common factors which can affect the payday loans are:
- Administration cost – The cost to start the loan. This vary from one company to other
- Interest charges –you should always inquire for the annual percentage rate (APR) before taking a payday loan. The APR is the percentage of loan you would be charged for taking the loan for a period of 12 months.
- Term of the loan – most payday loans are offered for a period of 30 days beyond which the company charges the borrower.
- Penalty charges – some company may charge you for paying the loan early. There are also charges for extending the period of the loan.
Payday loans are usually given for two weeks period and the companies charge APR around 390-700%. The average APR on a typical payday loan is 400% and together with all the finance charges it comes to 390-700%. The interest rate for payday loans are high because the companies lending payday loan are dealing with small amount and the turnaround time in providing these loans are very short.
If you are not able to pay the loan in the fixed time it will result in returned checks. You will have to pay the bounced check fees to your bank. It will also result in negative credit reports. You can also lose your bank account if the checks are regularly bounced from your account. It will also cause a problem for you to open a new bank account. Payday loans can trap the consumers in repeating borrowing cycles. If you are able to pay back the loan in fixed time you will pay less interest and hence it is recommended that when you take payday loan make sure that you pay it back in time.