What is a payday loan?

A loan provided until your first or second payday that rarely exceeds 30 days, in most cases not to exceed 14 days. It is a high interest loan with no credit check. The rates for this loan are commonly called fees vs. interest. The annual percentage rate could at times exceed 1000% depending on the number of days you have your loan out.

What are payday loans often referred to as?

Payday loans often go by a variety of names: cash advance, post dated check loan, deferred deposit loan, cash loan, no credit check loan, and many other names. When you are online, you will see banner ads with the catchy words like fast cash, get cash, cash now, cash in minutes, overnight cash, get up to $500, and many more phrases to catch your attention and draw people to their website.

How much does it cost?

A payday loan is very expensive if you are comparing it to conventional credit rates, you will pay $15-$30 per $100 borrowed for most cases 14 days and may even cost more if borrowing online. Wells Fargo Bank charges $10 per $100 for a direct deposited advance, but even this can be very costly because the money is taken from your very next direct deposit, which in many cases could be a few days. Like I said, compared to conventional credit, payday loans are very expensive and should be used with caution.

Should I use it to buy a gift or put weekend money in my pocket?

Absolutely not! In emergency cases only, should you get a payday loan. If you are a frequent user of payday loans it will not take you very long to see how much of your hard earned money you are flushing down the toilet. My advice to you is, only use payday loans under emergency situations and never make a habit of going to the same well.

What are my alternatives?

First show restraint and build your credit history. There are many non profit groups that will work on your behalf to build your credit. Ask your creditors for more time to pay your bills. If you don't think you are making headway in doing this, again there are companies out there that will help you negotiate for lower payments so you can loosen up that much needed cash. Make a realistic budget. My best advice is to keep a small notepad with you at all times and make a habit of writing down everything you purchase, including coffee, quick snacks, etc. You will see how your spending adds up. If you're not good at putting this budget together then get help for some financial planning. I've always made a habit of getting help from people who are gifted in areas that I'm not. Six months worth of payday loan fees will put an extra $600 in an emergency fund account or get some much needed bills paid off. This will take time, so you must work hard to practice self discipline. It takes 6 hard weeks of practice to create a new habit.

If you need time to get a good head start try some of the following ways.

1) Ask your bank if they offer overdraft protection. Caution: Many banks have it but if you go into overdraft they will charge you a hearty fee, same as an overdraft fee which can be as much or more than a payday loan fee. Make sure you ask your bank officer about the fees that may be attached to overdraft protection.

2) I know many people don't want to go to family members, but if you put together a good plan of action in writing on how you're going to turn your financial situation around, and let them know how they will get paid back, many family members will help. Remember to show them how you will cut back, if you don't show them how you will be willing to make the necessary sacrifices they probably won't want to make the sacrifices themselves. So be prepared.

3) Ask your employer if he/she will give you an advance on your payday. Again, if you simply explain your problem many employers will be sympathetic especially if you are a good employee. As an employer I would do it for anybody on my staff.

4) You can try a high-interest credit card, but even this requires some self discipline. Even a high-interest credit card is much less than a payday loan. If you discipline yourself to use the fees that you would normally pay to a payday lender to pay down your credit card you will have it paid off in no time at all.

5) You can try the company http://www.spotya.com. Spotya! offers cash advance loans without a credit check. The most you would ever pay is $7.50 per $100 borrowed for 30 days. This is less than some banks charge. No one, either online or even your local payday loan store, comes close to the cost of this no credit check loan. Once your loan is paid off you can always re-loan for a smaller amount until you are back on track.

The bottom line is that we all get into payday loans because of some emotional purchases we have made in the past. It is perfectly normal to desire something better, prettier, more fun or exciting, but only after we have counted the cost. Many of us also get a payday loan because of some sort of short-term emergency, but the root of the emergency derived from foolish spending in the past. So let's get the help and create the discipline and habits we need to get out of debt. You can do it!

I've taken the time to put together some of the following resources.

http://www.ftc.gov/bcp/conline/pubs/credit/repair.htm
http://www.consumercreditrepair.com
http://www.financialplan.com/cs/creditdebt/a/getoutofdebt.htm
http://www.credit.org
Rich Dad Poor Dad By: Robert T. Kiyosaki

About the author:
Dino L. Tagnani
Chief Executive Officer
Spotya!
http://www.spotya.com