Advance Payday Loans

Recently, much debate has swirled around the way advance payday loans are offered to cash-strapped consumers. Advocates indicate that such payday loans offer those in short-term financial strife a way to cover urgent, pressing costs that must be met before the next paycheck comes in. Critics, however, argue that advance payday loans are a means for lenders to take advantage of low-income wage earners who often know little about the lending industry and how interest payments work. So what is an advance payday loan after all? Is it worth the costs or should you avoid them altogether?

Truthfully, the answers to these questions depend largely on you, the consumer. Advance payday loans allow you to access money before receiving your employment paycheck and can thus be a very beneficial means of getting out of a temporary financial crisis that requires immediate cash on hand. Such crises could include anything from an urgent doctor visit to a car breaking down to a water heater going out. The important thing to consider here is that these are temporary, unexpected emergencies that may not fall under your current budget. If you don’t have the money on hand, but you will as soon as your paycheck arrives within the next week or two, an advance payday loan may be a viable option to bail you out of a difficult situation.

But advance payday loans do come with a cost. Each lender has its own established guidelines and contract agreements and it is important that you familiarize yourself with the terms of the loan before committing to it. Often when agreeing to borrow money for an advance payday loan, lenders claim the right to draft money directly from your bank’s savings account or hold a postdated check to pay off the loan. Additionally, on top of the amount you borrow, these lenders will charge a fee for lending you the money. It is important that you consider the amount of the fees that will be assessed and whether or not you can logistically pay it off with all of your other current budgeted expenses with your next paycheck.

One of the most important things to consider when looking into borrowing money for an advance payday loan is how much you will pay total, after all fees are assessed, for the loan. If, for example, you borrow $500, a lender may charge $25 for every $100. This means that you will eventually be paying $625 back to the lender. A date will be agreed upon in a contract for you to pay back the loan. If you cannot pay that amount back in the time agreed upon in the contract, late fees will likely be charged. Critics of advance payday loans argue that this is where many consumers who fail to educate themselves on the contract agreement can be taken advantage of. Late fees can be very hefty and it is even possible that you could end up paying double, or even triple the amount you borrowed in the first place.

Thus, you should ask yourself two very important questions when looking into borrowing money for an advance payday loan. First, is this really an emergency or one-time problem? Many consumers fall into the trap of getting an advance payday loan to purchase something that they don’t really need before considering the consequences of paying heavy fees later which ultimately make the original purchase cost much more than its value. Second, will I have enough money to pay back the loan in the time allotted in the loan contract? Because advance payday loans can often feel like a quick fix that relieves the burden of a pressing payment deadline, it is easy to overlook how much money and expenses you will have when your next paycheck arrives. Be sure to remember that the sum of the loan plus all fees will be taken from your next paycheck. If you can’t cover these costs and adjust your budget to have enough money for your regular expenditures—such as mortgage or rent payments, car payments, food, gasoline, etc.—you should probably consider other alternatives.