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The truth about payday loans

Money can be tight for all of us from time to time. Emergencies happen and whether your car breaks down or you have an unexpected hospital visit, you may not have the extra money lying around to cover the bills.
With the economic downturn many families are struggling to maintain positive monthly budgets, and to do so many have opted out of putting money away in an emergency fund. This is a bad idea. Everyone needs an emergency fund for life's little surprises so that they and their families are not left wondering how they are going to make ends meet should an emergency arise.
If you have one unexpected emergency, need cash quickly, don't have an emergency fund, and can't borrow from a friend or relative, then and only then should you look into payday loans.
Payday loans provide cash advances for upcoming paychecks, and are designed to be a last resort which is why they are able to charge high interest rates and service fees. Before you decide to secure a payday loan, however, there are a few things you should know in advance about these types of loans which may force you to consider seeking family help instead:
Initial Borrowing Fees Your initial borrowing fee can either be a percentage or a flat fee. Generally expect to pay $25 for every $100 borrowed. So if your car has an expensive $500 repair, you will be spending an additional $125 simply to borrow the money.
Rollover Fees Let's say your car breaks down, and you take out a payday loan only to have your next paycheck be consumed by an unexpected medical bill. Because you are unable to repay your payday loan, you will have to extend it and be charged an additional $25.
Interest Rates Payday loans have incredibly high interest rates. For a 14 day loan, a borrower can expect an APR just above 651%.
Again, payday loans may be a good lending option if and only if you intend to use them once. If you choose a payday loan, consider the fees that will be attached so that you can budget them in to your next month's budget.
To avoid having to use these costly loans however, start saving in an emergency fund. Every family should have an emergency that can sustain them for three months, but that isn't always a possibility. If anything, make sure that your emergency fund has a couple extra hundred or a thousand dollars in it, depending on your lifestyle, to cover any emergency expenditures which may arise.
No one likes to feel as if they have no options when it comes to funding an unforeseen expense. However, you shouldn't have to pay more of your hard earned money simply to get it in advance.


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