Payday Loans

A payday loan — that is, a cash advance secured by a personal check or paid by electronic transfer — is very expensive credit. How expensive? Say you need to borrow $100 for two weeks. You write a personal check for $115, with $15 the fee to borrow the money. The check casher or payday lender agrees to hold your check until your next payday. When that day comes around, either the lender deposits the check and you redeem it by paying the $115 in cash, or you roll-over the loan and are charged $15 more to extend the financing for 14 more days. If you agree to electronic payments instead of a check, here's what would happen on your next payday: the company would debit the full amount of the loan from your checking account electronically, or extend the loan for an additional $15. The cost of the initial $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

Alternatives To Payday Loans

Rather than taking out a payday loan, ask your employer for an advance or consider a small loan from your credit union or a small loan company. Some banks may offer short-term loans for small amounts at competitive rates. A local community-based organization may make small business loans to people. A cash advance on a credit card also may be possible, but it may have a higher interest rate than other sources of funds: find out the terms before you decide. In any case, shop first and compare all available offers.

If you are struggling to make ends meet, make sure you understand your options. Contact Lynch Law Offices, P.C., to schedule a free initial consultation with an attorney. We represent clients in Naperville, Wheaton and throughout the Chicagoland area. Call us directly at 800-491-7493.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.