Hampton Roads Business & Marketing Blog

Archive for December, 2010

There is a right way and a wrong way to use online payday loans. We will explain how these loans are beneficial, but also how they can quickly turn against you. Payday loans are designed to help you get through the month from one pay period to the next. An example will be worth more than a description.

You earn $2000 each month. Your bills are $1500 leaving you with $500 each month, of which $400 is invested in your retirement account. This leaves you $100 in ready savings. Unfortunately an emergency occurred last month, wiping out your savings. This month another emergency has occurred. You will have the money for this emergency, but you get paid bi weekly and you are not due to be paid for another week. Thus you decide to seek a payday loan from an online source.

You know the interest rate or APR is 365 percent. It means the periodic rate is 1 percent. With seven days left till you get paid you will be charged 7 percent, plus a 25 percent fee. Still, when you get paid you will have the money to pay off your payday loan and to pay the bills you have for the rest of the month.

This is how to use a payday loan. If you cannot afford to pay the payday loan off it will continue to accrue interest. If we use the example above you would accrue 1 percent interest each day you have the outstanding loan. It will quickly become double what you borrowed from the company and become a difficult loan to pay off. You may even find your other expenses are getting harder to pay.

Like most loans from a bank or other financial institution payday loans are best used by a responsible person who knows they can pay the amount they request back within the allotted time. In this way the fees remain fairly low, and they are also able to deal with the emergency. Since other loans can take months to obtain and stock investments can take more than a week to be taken out and sent to you, using online payday loans may be the only option. They are quick cash options in that you apply for the loan and receive the money in the same day by direct deposit. When using these loans weight the advantages and disadvantages to decide your best course of action.

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