Are Payday Loans Really a Scam?

Payday loans can also be known as cash advances, payday advances or paycheck advances. These financial products are short term loans, usually the amount of the loan varies from $100 to $500 but the amount can sometimes rise to $1500. A borrower can usually expect to pay an amount somewhere between $15 to $30 per $100 borrowed. When when you put this in terms of APR this translates to rates of 300 to 800 percent.

Paycheck advances have been given a lot of bad press in recent times. The reason for this is the questionable practices done by payday loan companies. The practice that receives the most amount of criticism is the high interest rates of payday advances. The high interest rates are charged as the loan amounts are smaller than traditional loans and borrowed over a short time period and this means that payday loan companies would not make any profit if they charged interest rates that are similar to typical loans.

Another reason cash advances are often thought of as scams is that borrowers can potentially end up stuck in a spiral of debt and it can be difficult to pay back the loan. For this reason, borrowers must ensure that they can pay off their debts when their next payday comes. It is very important that borrowers have a financial plan in place and do not apply for a payday advance (or any loan) without proper consideration.

As you can see, it is clear why payday advances are often criticized. However, most customers who make a payday loan application have already tried all other solutions available to them and most of the time, the only option they have left to fix their money problem is to obtain a payday advance. In this situation payday advances can be very useful and can actually save the borrower money when compared to credit card charges.

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The writer administrates a number of money related websites. For more information and advice on no fax payday loans or faxless payday loans as they are often called, visit the above links.

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