How Payday Loans Work.
In a typical payday loan situation, you write a personal check with a future date, commonly two weeks away. The check covers the amount you are borrowing plus the finance fee, which is often $15 per $100 you borrow. You must have a job or some type of income source to qualify for apayday loan.
ProsThey are more available across the country.They can help with a very short-term (up to 14 days) financial crisis if paid off before the loan comes due.You can apply online at many places.You borrow smallamounts ($1,000 or less).Depending on the lender, you can get the money via cash, check, prepaid debit card or through an electronic deposit into your checking account.Applications don’t show up on your credit history.Your credit score doesn’t matter.
ConsYou only have two weeks to pay back the loan.
It’s fairly easy to get stuck in a cycle of payday loans when you’re unable to pay off a previous loan.
You pay more fees and finance charges for late payments, or if you cannot pay off a loan.
A loan could seriously hurt your credit score if not paid back on time.
Charges equate to 400 percent APR (assuming a typical loan with a $15 finance fee per $100 borrowed).