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Payday Loan, Is it your best choice?

Payday loans are available to obtain a small amount of money very quickly.

A payday loan is described as: a relatively small amount of money lent at a high rate of interest on the agreement that it will be repaid when the borrower receives their next paycheck. The companies that offer such loans have come under scrutiny for less than honest practices and congress and the FDIC are working to instill some form of regulations on such businesses.

Settlement Scam

How does a Payday loan compare to say use of a credit card?

To use a commonly understood view let’s look at the annual percentage rate (APR) comparison. A standard credit card has an APR of 12% and a standard loan APR is around 7%. Payday loans, in most cases, would carry an APR of about 400%, but the APR can go as high as 5,000%.

The good thing about a payday loan is that, you typically don’t have a chance to continue accruing percentage fees, because they are short term loans. The fees are assessed as a set dollar amount. If you pay it back as agreed you don’t face penalties, but these loan companies “bank” on you having to pay non payment penalties.

Before you get in bed with a Payday Loan company consider that even when you feel like you have no other choice, you always have choices. says this:

Alternatives to Payday Loans

  • Negotiate a payment plan with the creditor
  • Charge the amount to your credit card
  • Receive an advance from your employer
  • Use your bank’s overdraft protections
  • Obtain a line of credit from an FDIC approved lender
  • Borrow money from your savings account
  • Ask a relative to lend you the money
  • Apply for a traditional small loan
  • Ask your creditor for more time to pay a bill
  • Use a cash advance on your credit card

If you feel that your only remaining choice is to take out a payday loan remember…

You are still the customer and they want your business.

  • Shop around for a trusted payday lender that offers lower rates and fees.
  • Borrow only as much as you know you can pay back with your next paycheck.
  • When you get paid, your first priority should be to pay back the loan immediately.

If you find yourself in a financial situation that you are not able to recover from, it may be time for you to consider the option of BankruptcyCall or email New Mexico Financial Law for a consultation.

We are a debt relief agency and have practiced bankruptcy law for a combined 50 years. Our services include helping individuals and couples file for bankruptcy relief under the Bankruptcy Code.


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