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Payday loans

I need money now. Should I get a payday loan? What other options should I consider?

Before choosing a payday loan, take a minute to think about the costs and all your other options.

First, if you take out a payday loan, you will likely be charged a fee of between $10 and $30 for every $100 borrowed. A $15 per $100 fee is typical. So, if you have an emergency and need $300 today, you would have to pay back $345 in a couple of weeks, assuming a fee of $15 per $100 borrowed. If your budget is already tight, that may be hard to do. The payday lender may encourage you to pay just the fee and extend the loan another few weeks. In that case, you would spend $45 and still owe $345 when the extension is over – that means you’re spending $90 to borrow $300 for one month.

If you have an account at a bank or credit union, there may be less expensive alternatives available to you, especially if you have direct deposit or a stable credit history. A credit card or a pawn loan are other options.

There may be even more alternative strategies available, including those that don’t involve taking out a loan. Some employers, nonprofit organizations, and community groups offer advances or emergency credit. And don’t forget about help from family or friends.

Another option might be to negotiate with the creditor or biller about the debt or bill you owe. A smaller repayment amount at the lowest interest rate will not only help make repayment easier, it may also allow you to start saving some money for the next emergency that will come along.

Putting the $45 you would give a payday lender into a savings account every two weeks would add up to $1,170 – plus interest – in a year.

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