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Payday Loan Rates[Continued]
Carrie Lunsford needed $200 to register for a nursing class she needed to take at the community college. She already has her CNA certificate and works at a skilled nursing facility. Carrie is working for her RN degree so hopefully she can make more money.
Carrie applied for a payday loan with a company near her house. The loan for $200 was granted within minutes and with very little paperwork. The loan officer allowed her to write a post dated check which would be cashed in two weeks for a $40.00 fee.
When payday arrived in two weeks, the $17,000 a year nursing home worker found she didn't have the cash to spare. She found that she had other financial priorities that included paying her electric bill, water & telephone bill. She also had automobile insurance and rent due.
The payday Loan manger told Carrie to not worry about it. He told her to just mail it in when she received her next paycheck. He also told her she would have to pay another $40.00 fee. Carrie thought she was off of the hook until her next payday.
Carrie realized she had to pay the same utility bills each month. It soon became apparent it was going to be very hard to come up with extra cash for the payday loan payment. One year later, Carrie still owes the $200 even though she has paid over $1500 in interest and fees. Undoubtedly, she had made a poor decision and was in way over head. She had actually paid more in fees than the original loan.
Is there ever a time when obtaining a payday loan can be a rational decision? Absolutely, yes there is. Payday loan companies serve a legitimate need. Payday loans can be a solution in an emergency and if used correctly can be a viable option. The trick is to pay the loan back as soon as possible. The longer it takes to repay, the higher the Interest rises.
Chris Thompson needed extra money to buy his girlfriend an engagement ring for Christmas. The timing of purchasing the ring was of crucial importance to him. Chris knew he would be getting an end of the year bonus of several thousand dollars from the electrical business he and his father owned together. The bonus would not come in time for Christmas.
Chris borrowed the money for the engagement ring with a payday loan that charged $10.00 interest rate per $100 borrowed. Luckily, Chris was able to buy the ring and repay the loan plus interest within two weeks.
Payday loan rates can be very high and they can create a disastrous financial hardship if not used correctly. It's important to search for the lowest payday rate possible, do your personal monthly budget while making absolutely certain you will have the funds to repay the loan on time.
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