What is the Best Alternative to a Payday Loan?

1
W H A T I S T H E B E S T A L T E R N A T I V
E T O A P A Y D A Y L O A N ?
B Y L E V E L F I N A N C I N G
2
(No Transcript)
3
Payday loans have seen their popularity increase
steadily in recent years. This form of
short-term loan allows you to borrow an amount
equal to a portion of your paycheck. You must
then repay it in one lump sum payment, usually
within two weeks. A recent report by The Pew
Charitable Trust focused on why many Americans
resort to this form of credit. Contrary to what
many believe, only 16 of borrowers use payday
lending for emergency expenses. The majority
(69) take out these loans to cover basic
monthly costs, like food, mortgage payments, and
credit card bills.
4
A payday lender is usually a small merchant
operating through a physical store or website.
How much you can borrow depends on your pay
stub, which you must show when you first
apply. Additionally, payday loans are unsecured,
meaning they dont require any collateral. In
some cases, you dont even need a bank account
to apply for them. This, and the fact that
lenders rarely run credit checks on borrowers, is
what makes them so attractive to many.
5
Very High Interest Rates And Fees A negative
aspect of these loan offers is the very high
interest rate charged by lenders. This is partly
due to the aforementioned lack of collateral and
credit checks. As if it wasnt enough, fees can
be considerably high too, averaging 15 for a
100 loan. According to Investopedia, the
average APR on these loans is a shocking 400 and
can be as high as 780 in certain cases.
6
A payday lender uses exemptions and loopholes to
bypass usury laws aimed at limiting high
interest rates. This means that they can only be
regulated by targeted legislation. Here is the
current legal situation with regard to payday
loans. Outlawed in Arizona, Arkansas, Colorado,
Connecticut, District of Columbia, Georgia,
Maryland, Massachusetts, Montana, New Hampshire,
New Jersey, New York, North Carolina,
Pennsylvania, South Dakota, Vermont, and West
Virginia. Some protection is offered in Maine,
New Mexico, Ohio, Oklahoma, Oregon, Virginia,
and Washington. No protection is offered in all
other states.
7
The high charges and lack of credit checks are
the reason why many observers consider payday
loans a form of predatory lending. Many
borrowers end up taking out a new payday loan
just to cover the cost of the previous
one. Indeed, the National Consumer Law Center
confirms that 76 of payday loan volume is used
to repay previous ones. Some even claim that
they are designed by lenders to be a debt trap.
8
T H A N K Y O U
H T T P S / / L E V E L F I N A N C I N G . C O
M / A L T E R N A T I V E - T O - A - P A Y D A
Y - L O A N /