Payday Loans Are A Short-Term Fix

Online, June 13, 2011 (Newswire.com) - Payday loans are short-term loans that can help you get out of a tough spot. But before you use one, make sure you understand the costs and risks.

Most often, payday loans are for a modest amount of money, and are usually repaid within a couple of weeks. To get a payday loan, you write a check for the amount of money you are borrowing, plus a fee, and you leave the check with the lender. The lender will cash the check once you are ready to repay.

If you can't repay the personal loan when it comes due, you can extend it - but keep in mind, there are additional feels for this.

The main pitfall is that they don't solve the real problem. If you are having financial difficulties, payday loans often just make the situation worse. You will be paying a really high rate of interest, which means your expenses will just keep going up. As a short-term strategy, payday loans can help get you through. But as a long-term fix, payday loans will crush you under a huge pile of debt.

If you bounce a check to a payday lender, the lender will report it to your ChexSystems file. Banks and retailers will likely then be unwilling to work with you. The lender may even sue you or send your account to collections, which will wreak havoc on your credit score.

Instead of applying for a payday loan, you may want to consider some alternatives. You should build up an emergency cash fund in your savings account, which will be there when you need extra cash.

Keep an open credit card for emergency expenses, or consider working out a payment plan with your lenders.

Whatever you do, weigh the consequences for your actions. Make sure that whatever steps you take won't come back in the end and drag you - and your finances - down.