Pay Day Loans - The Good, the Bad and the Ugly Facts About Pay Day Loans

So let's have a look at the good, the bad and the ugly about cash advances. We'll start with the good:

A pay day loan can genuinely get you out of a tight financial spot. It's delivered quickly and is specifically geared towards being a small amount. That means that you don't borrow a terrifying sum you will never be able to pay back. It also means that you are only in debt for four weeks or one month, whichever is up first. At the end of this period you should have paid back the loan figure plus all interest, thereby clearing the loan and closing your account.

So that's the good. How about the bad?

If you can't pay your cash advances back in that magic four week/one month period (plus interest) then you start accruing interest payments that can dwarf the original loan figure. Your interest is calculated at an APR of anywhere between 300 and 400 per cent - so clearly the longer you leave the closing of the loan, the worse it gets. Do you fancy repaying 500 for a loan of 100?

It must be pointed out that the purpose of these crippling APRs is to make you pay off your loan within the first four weeks. So in a way, some of this bad is actually good - in that the loan provider is, in a sense, being responsible by making it very painful for you to string out your loan period.
On the other hand, if you can't pay you can't pay. And so your interest charges go up - and then you can't pay for longer because you owe even more. And so on. If you're really unlucky you can end up owing thousands from a loan of less than 500.

The key is to only borrow a tiny amount - which you can guarantee full repayment of, plus interest, from your next pay packet. That's why cash advances are now often referred to as pay day loans. You must remember, though, that you also have to pay your bills and eat over that next period - so your original loan amount, plus interest, plus all monthly household expenses, must not total more than your pay check.

So what about the ugly?

Well, cash advances are part of an inherently ugly system, unfortunately. That isn't the fault of the cash advance companies, which have sprung up to provide a service where people need it most. But you can't really divorce personal loans for people with bad credit from the whole climate of financial despair that modern life seems to have fostered. All you can do is be sensible, and treat these loans as the absolute last resort they really are. Why else would you borrow anything with an APR of 300 odd per cent?  


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