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Payday loans should be the last option
Thanks to the economy, many people live from a payday to the next. At times of emergency, they have no option but to go for payday loans. But are they doing the right thing by seeking payday loans at exorbitant rates? It is common to find lenders take advantage of the situation and offer these people payday loans. An example of how payday loans work is given below:
A person requires $ 500 to meet some urgent expenditure. His next payday check goes into his checking account in 10 days. He has no money in his checking account on the day he needs this $ 500. He opens an account with a lender and approaches for an urgent payday loan. The lender, who deals in payday loans, now offers $ 500 to the individual. He takes a check for, say $ 530 post dated to the day on which the paycheck goes to the bank. This means an interest amount of $ 30 for 10 days. After 10 days the individual has the option of paying back $ 530 in which case the check written 10 days is back with him. Else he can authorize the lender to deposit the check into the bank.
The above example typically exposes those seeking payday loans to an unacceptable high rate of interest. If the payday loans are sought sparingly depending on the emergencies, it is OK. But if people make it a practice to get money from the lender by applying for payday loans, then it is not welcome. The person should be able to control expenditure and never resort to payday loans with high interest rates.
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