Quick Loans from Payday Lenders Should Be Avoided for the Holidays

[Nov 25, 2009.]

 

Parents who have children clamoring for Zhu Zhu Pets or any other popular toy this holiday season may feel pressured about coming up with enough funds to buy gifts. However, the temptation to get quick loans from payday lenders in order to shop for the holidays should be avoided. Consider that about 13.5 million people still have loan or credit card debt from last year's holiday season, according to Consumer Reports magazine.

Fast Loan Has High Cost

Scores of people with bad credit or no credit have used payday lenders, also called cash advance lenders, to tide them over between paychecks. The main problem with these loans, however, is that they come with exorbitant rates of interest. In many situations, borrowers end up paying an annual percentage rate (APR) in the triple digits. It's not uncommon to see people with an APR over 300%.

Personal Loans with No Credit Check

Payday loans appeal to people who are unable to get credit elsewhere. These loans are usually a last-ditch effort to come up with cash.

The way it works is a borrower writes a check payable to the lender for the amount he wants to borrow, plus a fee. The lender holds the check until the person's next payday. At that time, the borrower is expected to pay the loan off in full, or roll it over into a new loan if he can't afford to pay. Each time the loan rolls over, additional interest is tacked on to the outstanding balance.

Find Alternatives to Payday Loans

For people struggling financially, this may be the year to say "enough is enough" and cut back on holiday spending. They can choose to purchase only a few, inexpensive gifts and limit giving to people in their own household.

Those who are really facing an economic crunch can consider giving loved ones the gift of quality time. Handmade certificates that promise a chore, favor, or other helpful service can be given instead of store-bought presents.

Personal Loans with Lower Rates

For some people, old habits die hard and they may still choose to borrow money. When shopping for a personal loan, it's important to compare several deals. It's crucial to understand all the terms and conditions of getting a loan, such as fees, interest, and repayment terms. Borrowers can begin an area search for personal loans here.

The bottom line is that it's never smart to borrow money you can't afford to pay back. Those who decide their only choice is to get a loan should borrow as little as possible so they won't get caught in a never-ending cycle of debt.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.