Millions of Americans can’t work and have lost part or all of their income due to the Coronavirus pandemic. This kind of financial stress is causing people to look for loan options in order to make it through this difficult time. Payday loans are one option many people may be considering right now, but it can end up costing you in the long run. Here’s what you need to know about payday loans.
What is a payday loan?
A payday loan is a short-term loan that can help with expenses until your next paycheck. You typically get a few hundred dollars, which usually has to be paid back in a couple of weeks or your next payday.
How does a payday loan work?
You normally give the lender a check for the amount you’ll be borrowing, in addition to a fee. The lender typically gives you the cash, minus the fee, and then cashes your check once it’s time to repay.
For example, if you want to borrow $400 and the fee is $75, you’ll end up writing a check for $475. The lender will give you the $400 and keep your check. In two weeks, or whenever you have to repay, you pay $475. It ends up costing you $75 to borrow $400 for two weeks.
Better ways to borrow money
Payday loans are typically much more expensive than getting a loan from your credit union. A loan from your credit union will usually offer longer terms, lower interest rates and larger lending limits.
We understand these times are financially stressful and want to help in any way we can. Before getting a payday loan, talk to a Partner Colorado representative and learn about other loan options that may be available to you. It could end up saving you a bundle in the long run.