Cash / Payday - Payday Loan

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$200 Payday Loan

 

A payday loan is a high interest short term loan usually made by alternative money lenders such as check cashing establishments and pawn shops.

Many of these cash loans are called payday loans because they are made to working class people who are expected to pay the loan back on their next payday. Check cashing shops often make these loans because they think the borrower will pay them back when they cash a check.

Another popular kind of $200 payday loan is a check loan. In a check loan the borrower writes a check for the principal of the loan plus interest and fees which the lender will cash on a certain day. The expectation is that the borrower will have the money to cover the check in the account on that day.

The High Cost of a $200 Payday Loan

A $200 Payday loan can be very expensive because of the interest and fees that a lender will attach to it. Some cash lenders will charge 25% or 30% interest, on a $200 payday loan.

These cash loans cost a lot of money because the interest is charged on a very short term basis. Many cash loans become due very quickly often in a week or two weeks. The borrower has to pay back the loan back or the lender will charge interest on it. This can quickly add up to interest charges that exceed the amount of the original loan if the borrower isn’t careful.

Some lenders will tack expensive fees onto cash loans. They may open a new loan every two weeks and charge a $25 renewal fee for example. As with the interest charges the fees can quickly add up.

How Payday Loans Work

One of the few advantages to payday loans is that people with bad credit can easily get them. The reason for this is that cash loan lenders have several mechanisms that can assure repayment of the loan.

Many online cash loan lenders require the borrower to provide their bank account numbers. The lender needs the numbers so it can electronically deposit money directly into their bank account. When the borrower provides this information he or she signs an agreement that gives the lender the right to electronically withdraw the loan repayment amount from their bank account on a certain date.

Other lenders will require borrowers to sign an agreement to repay their loans when they cash their paychecks. Others will ask borrowers to put up a signed check that they will hold and cash when the loan comes due. The check is for the amount of the loan plus the interest and fees.

Quite a few cash loan lenders will give the borrower the option to open a new $200 cash loan every week or two weeks. This enables the lender to keep charging high fees and interest and make more money.

Avoid $200 Payday Loans

It is best to try and avoid cash loans for small amounts such as $200 because of the high costs associated with them.

Borrowers would be better served to seek alternatives such as credit cards, pawn shops loans, checking account credit, loans from family and friends or government assistance programs. Even though some of these alternatives charge interest and have to be repaid they are all cheaper than $200 Payday loans.