If you need money to pay your bills, you might think about getting a payday loan. But before you sign on the dotted line, you should know there are serious downsides to payday loans and there are other options you should consider.
What you don’t know about payday loans could cost you.
Payday loans might look like a quick, easy way to get cash when money’s tight. There’s not a lot of paperwork, no credit check, and you don’t have to give the lender something of value, like the title to your car, to qualify. But there are serious downsides to payday loans.
How do payday loans work?
A payday loan is a very short-term loan that provides you with a small amount of cash. You can apply in person or online. You write a check or set up an electronic debit from your checking account for the amount you want to borrow plus any fees. The lender gives you the cash and holds the check or debit until you’re supposed to pay the loan back, usually in a week or two or when you get your next paycheck. At the end of the loan period, the lender cashes the check or withdraws the amount from your bank account.
If you can’t pay the loan back, you can roll it over, basically taking out a new loan. When you roll the loan over, the lender adds additional fees to the amount you owe, so the amount you need to pay back grows.
What are the downsides of payday loans?
There are several big downsides:
Four alternatives to payday loans.
Before taking out a payday loan, look into these other options:
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