The advertisement says, “Home of the cheapest payday advances. Get a loan for only $10 per $100 borrowed.” If you visit this site, you will find that they are pretty honest and upfront about their fees. In the fine print they explain that $10 per $100, charged every 14 days is equivalent to an annual percentage rate or APR of 260.71%. They even offer a “loan calculator” so that you can see that $500 will cost you $100, if you take 28 days to repay. Suppose you are unable to repay this loan for three months, they will deduct $100 from your checking account every 28 days and you will still owe the original sum of $500. How can anyone call this cheap?

Advice from the FTC

The Federal Trade Commission or the FTC provides information to consumers and investigates claims of fraudulent or deceptive business practices. They advise consumers to avoid these short-term, expensive loans if at all possible. Lenders are required by law to provide consumers with information concerning fees, interest rates and finance charges before the consumer accepts the loan. Among other things the FTC advises, “If you decide you must use a payday loan, borrow only as much as you can afford to pay with your next paycheck and still have enough to make it to the next payday.” Reason being; if you are short on cash now and you normally have a hard time making it from one payday to the next, an extra bill is only going to make it harder for you. And the longer it takes you to repay this loan, the more it is going to cost you. Some people think that the weekly, bi-weekly or monthly fee that is deducted from their checking account is being applied towards their loan balance, but this is not the case. The payday lender could take that fee out for months and you would still owe the total amount that you originally borrowed.

Options

If you have a credit card, a cash advance from your credit card company will cost you less than a payday advance. Fees and interest rates applied to a credit card cash advance are more than those applied to other purchases, but still less than what is charged by a payday lender. Check with your bank or credit union and apply for a small personal loan. Borrow money from family or friends. Retired and active duty military personnel have other options. Check with your commanding officer or on-line for information regarding emergency financial assistance. If you need money to pay utility bills, the utility companies will often grant an extension, if you call them. If you are having trouble paying other bills, call your creditors and try to work something out with them. Try just about anything, before you try the payday advance.