Payday loans are often criticized for their high interest rates. However, these small personal loans are an affordable option for people who are unable to take advantage of mainstream bank loans. Most people who use payday advances are successful at sticking to a budget and managing their finances, but unexpected expenses can throw their budget out of whack. Payday lenders help hardworking folks who have a hard time paying for groceries, gas and other routine expenses in a given month due to emergency expenditures that are out of their control. Sometimes a check advance is the best solution to help make ends meet between paychecks.
If emergency expenses make it difficult to keep up with monthly bills, most people with poor credit have limited options. One choice is to mail checks for bills even if the funds are not available in your bank account. It is possible that some of the payments may not be processed until after you receive your next paycheck, but this is unlikely. In reality, some if not all of your checks will probably bounce, resulting in expensive overdraft fees. In general, banks and retail stores charge a fee of $25 to $35 per bounced check. In addition, bounced checks could stay on your ChexSystems record for 5 years, which could also affect your ability to be approved for a bank loan. Bouncing checks on a regular basis will also make it difficult to open checking accounts at other banks in the future.
Overdraft protection programs are another option if there are insufficient funds to cover checks. Bank customers who have overdraft protection can write checks for bills even if the funds are not available in their checking account. However, banks typically charge costly overdraft fees each time a checks bounce—at least $25 per overdraft charge.
An emergency payday loan is another way consumers can handle unexpected bills between paychecks. With a payday advance, the funds are deposited into the borrower’s checking account overnight. Many payday lenders offer quick approval. If the loan is not paid back by the next payday, the borrower’s costs can increase from the initial finance charge. Payday lenders are upfront with the fees associated with a loan, so there are no hidden surprises.
The fees associated with a payday loan are preferable to the late fees customers would incur by failing to make monthly credit card, utility or car loan payments. In addition to having to pay late payment charges of approximately $35 per credit card bill, customers also face expensive reconnection fees for utility payments. Moreover, late credit card and car loan payments are reflected on credit histories for years. Missed payments can also lead to higher interest rates on credit cards.
Compared to missing payments, NSF fees or overdraft protection programs, an emergency payday loan is an affordable option. Using a paycheck advance and paying it off in full at the next payday is a cost-effective way to cover unexpected bills without incurring late fees or damaging your credit. When used responsibly, a payday loan is one of the most convenient and reliable ways to handle a financial emergency.