For many people who need cash fast, payday lending companies hold the answer.  They offer loans that are easy to obtain and require no documents for approval.  Unfortunately, their payday loans are also well-designed debt traps for many cash-strapped individuals, what with interest rates that can triple over a short period of time.  This type of predatory lending practice cost many American families more than $4 billion dollars a year and the numbers keep rising.

Pros & Cons of Payday Lending
For a short-term cash need to pay for an emergency expense, payday loans offer an alternative if there is nothing else.  Since there is no credit check, payday loans are available for most individuals.  Even people with bad credit can still take out a payday loan, provided he or she can issue a post-dated check. 

On the downside, payday loans may not be the best alternative there is because of the high interest rates.  Most lenders require borrowers to pay about $15 for every $100 borrowed for only two weeks.  At first glance, the figure may not amount to much but more often, borrowers are unable to pay for the loaned amount at the end of two weeks.

As a result, they are forced to extend the loan for a specified period of time at a higher interest rate.  If the loan amount is broken down and spread over a year, the APR is staggering, hovering between 300% and 500%.

Payday loans may be a very convenient way to obtain cash but it should not be considered as the first and only option.  The way the interest rates go, there is no way a borrower can pay back the loan during the agreed-upon period.  A law has yet to be passed to put a cap on interest rates for non-military borrowers but until then, consumers should learn to protect themselves.

[image from femail]