When people get into financial difficulties, one avenue they may turn to are payday loan establishments. When you take out a payday loan, you borrow a certain amount of money and on the date that you receive your next paycheck, that amount plus a certain amount for loan costs will be due.
Payday loans are one of the last places to get money from because of the extremely high fees. Fees can be as high as $30 per $100 borrowed, that comes out to about 650 percent annual interest rate.
In many cases, the borrowers are unable to pay that amount when they get paid and end up rolling the original loan into another loan and continue onto an endless roller coaster of debt. In some instances, they may end up extending the original debt to another payday loan company. With the extreme interest rates, the debt continues to rise quickly.
Once you have submitted an application with personal information and your checking account information the amount of the loan is direct deposited into your account. The loan fees and amount of the loan are due on the date of your next paycheck.
Besides payday loan physical sites there are now many websites online that offer payday loans. Experts advise people to stay away from payday loan companies at all cost. Although, payday loan companies can mean trouble, it may be more dangerous getting involved with online payday companies.
Some things to watch out for with payday loan websites are:
Electronic access to accounts
It is likely that the company will request electronic access to your checking accounts so the loan amount and fees can be electronically withdrawn on the date it is due. There is also the risk of other money being withdrawn and the increased risk of identity theft.
If you do not have enough money in your checking account when the loan is due, you will be charged insufficient funds fees by both the payday lender and the bank.
Risk of identity theft
You will need to fill out applications with personal information whether you borrow from a payday loan location or an online website. With the physical location it will be easier to know who you are working with. When you are dealing with a website you have no idea who you are working with and where your personal information is ending up.
You may find yourself in financial difficulties, but in many cases it is advised to try other avenues before taking out a payday loan. There are more dangers with payday websites than physical payday loan locations.