The American Consumer And Payday Loans




Online payday loans are just one of many credit options available to ordinary Americans to manage their finances.  Before you use one of these products you should learn something about them.  You should know what they are for, and especially, what they are not for.  You should be aware of the costs of such products, how to use them sensibly, how to minimize any charges, how to tell rogue lenders from bona fide companies and then decide if this product is indeed for you.

Online cash advances or payday loans, are products designed to cover short term debt problems. They are usually for small amounts ($100 to $500) and cover a period of two to four weeks which is essentially the time frame needed for an advance on your paycheck to cover an unexpected short term lack of cash.  They do not claim to be, and are not, a long term solution to large financial problems.  Neither should they be used for holiday expenses, shopping sprees or totally unnecessary spending.  If they are used for any of these purposes then they will cause debt problems instead of solving them.  If used sensibly, they can save you money, embarrassment and credit rating problems.

Like all unsecured, short term credit products, a faxless cash advance can seem expensive in comparison to long term loans. In APR terms, depending on which lender you choose, rates can be as low as 300% to highs of over 500%. This figure seems high, but if late payment charges and bounced check charges are converted to APR terms, they are measured in thousands percent. Check the dollar figures from lenders, since these can vary from $10 per $100 borrowed to $20 and $30 per $100.

Sensible use of these products can also cut down on the charges. Some lenders are very flexible, allowing early repayment with pro rata charges, others are not so flexible, so choose your lender carefully. Most firms allow roll over options, but you should be aware that these can double the charges.  You should use roll over options sparingly and avoid lenders that encourage you to roll over. The advent of the Internet and the availability of faxless payday loans have encouraged a lot of rogue players to enter the market. Some of these will have very high charges (over $10/$100 borrowed) or have inflexible payback terms.  Avoid these.  Choose a lender with low charges and flexible pay back terms.

An online payday loan can be a boon to ordinary people. Although borrowing from friends can seem financially less expensive, in the long term it can prove very expensive in terms of friendship. Used sensibly and sparingly they will save you embarrassment, expensive bank charges and trouble with your credit history.

