Payday loans are a very commonly used financial tool. Almost anyone can qualify to obtain a cash advance loan. These short term loans are used for sudden emergencies that will not fit into the regular budget, such as car repairs or emergency medical bills that must be paid immediately. They are available to almost anyone with income and a bank account, but the interest rate charged for these loans is very high. Another common reason some people take out a quick cash loan is to avoid an even higher fee from a late credit card payment or bank insufficient funds check charge. Fast cash loans are designed for short term occasional use, but many persons get trapped in the pitfalls of payday loans.

Avoid Getting Trapped in High Interest Payday Loans

There are several pitfalls to beware of when using payday loans. Being unable to repay loans on time is one big pitfall. The problem here is that the borrower usually cannot repay the loans they have out at one time when due. To solve that problem, they borrow for another period. This continues until loans are finally repaid, but the high interest fees can really mount up over time. These loans are usually due in 8 to 30 days, whenever the borrower is paid. Revolving that loan for a few times can really skyrocket the amount of interest paid on the original amount.

Short term cash advance lenders are not bound by government regulations with regard to the amount of interest they can charge. Banks are restricted to around 36%, but these payday loans can carry interest APR rates as high as the market will bear. Most begin around 396% APR, but some can be as high as 2000% or more. A typical fee for borrowing $100 is between $15 and $25. This amount is added to the borrowed amount every time the loan recycles. If you borrow $100 one time, plus the $25 fee, you will owe $125. If you cannot afford to repay all that on the due date, you may again borrow that original $100 and then owe another $25 fee.

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