The reputation of personal payday loans has gone really bad, especially during the economic recession we all have been struggling with. If you are one of those wise people who have not relied on short term payday loans, then you must have realized that taking out them can only lead you to pay a whole lot of interest that is much more expensive than that with any other traditional loans. To make things worse, these instant cash loans are short term, which means you only have a couple of weeks to pay back the lending company.
The main reason why a lot of people have given up on short term payday loans same day is that direct payday lenders charge extremely high interest rates, which usually is the reason why borrowers get trapped into the habit of repeated borrowing. In most cases, the interest rates applied to same day loans are anywhere from 9% to 14%. You may think this is reasonable, but if you take a look at the average APR being used by credit unions, banks and other more traditional lending companies, you will be shocked and probably discouraged from short term payday loans same day.
Interest in Detail
To explain more about the interest rate used for cash advance loans, it could be considered simple interest. That means you should return X% of the amount you borrow plus the exact amount you borrow on your next salary day. Using the traditional calculation of APR, it turns out that the 10 to 12 percent interest used by payday companies is equivalent to an APR of 300 to 400 percent. With this, there is little or any doubt that short term payday loans are simply taking advantage of the borrowers’ needs and lack of knowledge about the workings of the industry.
If you are wise enough, you know that you had better stay away from short term payday loans same day especially if there are other types of credit you can use. This, however, is easier said than done. There could always be situations that are out of your control when you would feel so financially miserable. But again, this does not mean you should immediately turn to legitimate payday companies for help.
Before You Sign Up for a Payday Loan
It is important for payday loan borrowers to look around first for other types of credit before signing up for short term payday loans. If you, for instance, are currently employed, there is a good chance that you can file a cash advance request from your employer. This way, you would not need to worry about paying off the loan interest from a direct instant loan company.
The bottom line here is that you should try to avoid taking out payday loans as much as you can. As stated before, you should first try other ways of getting credit. More importantly, you must learn to live within your means. It is your attitude towards money that is giving you financial problems in the first place.