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Payday loans: Beneficial or destructive?

If you have to live from one paycheck to the next, being prepared for the worst can be a significant source of anxiety. Without a savings account or credit card to fall back on, you may be considering a payday loan to get you through a crisis. Before you make that choice, there are a few issues the Miami Herald mentions that could be a recipe for financial disaster.

Florida has specific guidelines that are supposed to keep payday loan companies from taking advantage of you. These include limits on how much you can borrow and what fees can be charged. However, the guidelines do not prevent the companies from charging you extremely high interest rates, which could be around 300 percent. You could end up paying the company as much as $1,500 on a $500 loan, if you are able to keep up with the payments.

Although the payments may seem reasonable when you get the loan, it is a good idea to subtract that amount from your monthly income to make sure it will leave you enough to take care of your regular bills. You should also read the fine print to see what will happen if you are unable to make a payment.

When you give a company access to your bank account, it can withdraw the money as soon as you have it, even if there is not enough left over afterward for you to take care of your necessities. These are just a few things to think about before signing up for a payday loan. The information should not be interpreted as legal advice.

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