//Payday Loans: Credit at a High Price

You’ve probably heard or seen ads for payday loans. They’re everywhere: radio, television, billboards, the Internet, even in your mailbox. You may even know someone who used a payday lender. Although payday loans provide a quick way to get money, they are really expensive and will only worsen your financial situation in the long run.

What are Payday Loans? Payday loans offer short-term credit at high rates. They are typically made by check cashers and other companies. You may even find them at places like liquor stores and pawn shops. To receive a payday loan, you write a check for the amount you want to borrow, plus a fee. The company then gives you the amount of your check, minus the fee. When the next payday rolls around, you have several options:

• Allow the company to cash the check you wrote for the loan
• Go to the company and pay off the loan
• Extend the loan by paying another fee (the most expensive option)

Payday lenders often charge between $15 to $50 for every $90 borrowed. If you extend or "roll-over" the loan, you must pay the fees for each extension. This could bring the Annual Percentage Rate (APR) of your loan to as high as 400% - 800%. At this high rate, you could easily end up using most or all of the money you borrowed to pay the costly fees.

Alternatives to Payday Loans. There are several options to consider instead of using a payday loan. When you need credit, shop carefully. Look for the credit offer with the lowest rate. And, don’t forget to come to your credit union for far and affordable loans.