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Not everyone has access to cash when they need it. If you find yourself in this position, there are lenders that can help—for a price. Often called payday loans or cash advance loans, these short-term, high-fee loans can turn a temporary setback into major financial crisis. However dangerous, the popularity of payday loans continues to grow among certain segments of society.

How payday cash advance loans work

Here’s how they work: let’s say you wrote a personal check for $330 to borrow $300 for up to 14 days. The payday lender would agree to hold the check until your next payday. At that time, the lender deposits the check, you redeem the check by paying the $330 in cash, or you rollover the check by paying a fee to extend the loan. In this example, the annual percentage rate (APR) is 260.71 percent!

Alternatives to payday loans

If you find yourself needing cash, consider these possibilities:

 

  • Extra income. Find out if your company offers overtime or bonuses for additional work. You might also consider holding a garage sale or offer to baby-sit for a neighbor’s children.
  • Compare loans. Consider a small loan from your credit union, an advance on pay from your employer, or a loan from family or friends. You can also take out a cash advance on your credit card, but you may have to pay a high interest rate.
  • Negotiate. Contact your creditors to request more time to pay your bills. Ask that they waive late charges and get the details of any agreement in writing.

If you simply cannot avoid taking out a payday loan, borrow only as much as you can afford to pay back. Payday loan rollovers can lead to a vicious cycle of unending debt.