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Payday loans come at a very high price. They have
near the highest interest rates and fees allowed by law.
My first advice is not to patronize the fast loan folks, including the tax
preparation companies.
They are also known as cash advance loans,
post-dated check loans and deferred deposit check loans.
A borrower will write his personal check to the
lender for the loan amount PLUS an additional fee. He then gets the money
for the loan excluding the fee. Fees are
charged based on a percentage of the face value of the note or a fee is imposed
for each $50 or $100 borrowed.
Of course, the cost of the loan must be disclosed
according to the Truth in Lending Act. This includes a dollar amount for the
finance charge and the APR on a yearly basis.
You can extend the loan with the
"rollover" provision and that also comes with a fee.
Payday loans are legal. The industry got a bad name
because it preys on the poor people who cannot afford to set up a regular
checking account. Because many people default on the payday loan, the companies
resort to strong arm tactics to get their money back.
Your payday loan is like a check. When you sign on the dotted line you are, in
fact, giving the loan company the right to take the money from your account at
work.
You will be charged fees at the lender and at your
bank.
There are alternatives to payday loans but the
disadvantaged will be taken for the ride because, in reality, their alternatives
are almost zero.
Tips if you are hounded by loan collectors
1. When they call tell the person you are recording
the conversaition. Tell him to repeat the penalty for not paying immediately. It
is against the law to threaten on the phone. Also, the loan company cannot
dispense any confidential information.
In most states your wages cannot be garnished for
late payments on a payday loan.
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