If you're living paycheck to paycheck, an unexpected expense -- such as a car that needs urgent repairs -- can be a real problem.Payday advance loans offer a solution of sorts, offering small loans that borrowers pay back when they get their next paychecks. You pay a flat fee of about $15 to borrow the money, which you pay back when you get your next paycheck.
At any given time about $38.5 billion is loaned out this way, according to the Commercial Financial Services Association of America, the trade group that represents such lenders.
The borrowers are about 19 million households that are experiencing short-term cash-flow shortfalls, the group says. That amounts to about $2,026 per borrowing household.
Skeptics say the loans come at a high price. New York state, which does not allow payday advance loans, says on its banking department website that the short durations of such loans often means that borrowers have to extend them, racking up additional costs. The banking department adds that the interest rates on such loans can amount to 400% or more per year.
www.money.msn.com
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