Jean Baptiste Poquelin, using his pseudonym Moliere, once wrote: Debts are nowadays like children begot with pleasure, but brought forth in pain. And payday loans are debts. Some would like to wear rose-colored glasses and see payday loans as their own salary, the fruits of their labor, being spent just earlier than usual. And they rarely realize or admit that payday loans, like all other debts, must be paid on the agreed date. Payday loans, like all debts, demand fees and interests.
A payday loan is indeed begot with pleasure. Many lenders like to describe payday loans as quick and easy cash. Payday loans are confidential. No one else needs to know that you are borrowing money. Payday loans are fast. Some lenders even boast of “overnight”, “next-day” and “same-day” loans. And payday loans are easy. You need not bring titles of ownership of cars or houses that will serve as collateral. You need not produce a mountain of documents. With faxless payday loans, all you needed to do is fill up one online application form and then request your bank (by phone) to send a bank statement to the lender.
However, a payday loan is brought forth in pain. The date you wrote in your post-dated check is your first day of reckoning. If you were able to pay it in full and still have a manageable budget until the next payday, the you are one of the lucky ones. But many of the borrowers are unable to meet the amount they are supposed to pay. If the bank account has insufficient funds, the bank will charge NSF fees. At the same time, the payday loan lender will also charge a returned check fee. The amount is usually written, in fine print, in the part entitled “Terms and Conditions”. This part is often ignored by many borrowers. To give you an idea, some lenders charge $25 as a returned check fee.
Since your check bounced, the lender may sound gracious when it offers you the option to roll-over. In this option, you are actually increasing the amount you need to pay. And if you keep extending it, month after month, you will end up paying interest that is 300 times or higher than the original loaned amount.
Sometimes, the lender may just turn over your case to a collection agency. Collectors will hound you in your home and in your place of work. They will follow-up on you through phone or letters.
While collectors are banned by law to harass or threaten you, being called up by a stranger who will remind you of your debt does not exactly contribute to your peace of mind.
Before considering to take out a payday loan, the US Federal Trade Commission recommends that you explore other options such as considering a loan from family or friends or going to a credit union.