I have written links in the past about payday loans. Today, I am running a guest post from a lending company on the pros and cons of taking out a payday loan. The following is a sponsored post from The Payday Place.


Pros And Cons Of Payday Loans

There are supporters and critics of payday loans , and each has a valid point to make with regard to this “alternative” form of financing. Critics claim that interest rates, when extended over an annualized basis, are too high. Supporters counter that without payday loans, many people would be forced to borrow money from shady characters charging even higher rates of interest.

The fact of the matter is that legislatures and regulators in dozens of U.S. states have affirmed the legitimacy and economic necessity of payday loans. They see it as a real, essential tool for working families and individuals, providing access to credit that they might not get otherwise. The increase in payday loans companies online provide further evidence that consumers need this service and that most can manage the loans responsibly (i.e., if those loans went unpaid those companies would not be in business).

How Payday Loans Work

If you have a paycheck in the near future for $1200, you can borrow $300 or $500 or possibly more (this varies by state) from a payday loans company. You promise to repay the loan when your pay day arrives, or perhaps to amortize the payback over two or more pay periods.

The pitfalls for some borrowers basically fall into three categories:

  • Failure to pay back in a short time period – The longer the loan is outstanding, the higher the fees and interest charges. It’s best to always consider this a short-term loan.
  • Failure to recognize overspending – If the loan is to cover a one-time emergency expense, it makes sense. But if it is to make up for spending beyond income that happens week after week, month after month, a payday loan only is a way to dig a deeper debt hole.
  • Failure to find the best lender – Some payday loans companies offer better terms than others. Some operate offshore and do not adhere to state banking regulations. You would be wise to do an online comparison shop to determine which company and which loan terms work best for you.

Yes, there are risks in payday loans . But a smart borrower will effectively manage those risks and come out ahead.

Photo by: rinkjustice

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