With the holiday season approaching, you might be looking for extra funds to cover things like gifts and trips. But if you’re planning to borrow the money, make sure a payday loan isn’t your first — or only — choice. Sure, you might get the money fast, but the added fees and interest could make the payback really slow — or nearly impossible.
Payday loans offer quick cash for a fee to borrow the money for a short time. You walk out with the money you needed and a plan to pay it back in a few weeks. Easy, right? Not exactly. Watch this video to find out how payday loans work and why paying them back isn’t always as simple as it sounds:
Payday Lending - Personal Finance Tips
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The cost of taking out a payday loan racks up fast. The fees and interest alone could be in the triple digits. And if you can’t pay the loan back right away (which happens often), you might need to do a rollover — or pay extra fees to extend the loan. In the end, you’ll still owe the original loan amount and fees plus the new ones, too.
Before you get a payday loan, ask yourself: Are there any less expensive (and less risky) options to get the money? Maybe you ask for more time to pay your bills or see if you can borrow it from family or friends. Credit unions typically offer loans with lower interest rates than banks or other lenders. Check to see if a personal loan or “payday alternative loan” is a better choice. No matter what choice you make, make sure you know the real cost of any loan before you sign, and learn more about payday lending.
If you think a payday lender has been dishonest, report it to your state attorney general and the FTC at ReportFraud.ftc.gov.
