Although, according to a recent report, payday loans are increasing in popularity for consumers with bad credit, Americans should have more access to credit and take advantage of credit cards before they explore a payday loan, according to Michael Germanovsky, editor-in-chief at Credit-Land.com
MIAMI, Feb. 16, 2012 — Online payday loans are becoming ever more popular, according to Credit Land's research. These online payday loans are incredibly easy to access, but are incredibly hard to pay back because of their high interest rates.
On the other hand, there are many benefits of using a credit card over a payday loan. For example, credit cards are considered a better type of loan and help you improve your credit history by reporting your timely payments to major credit bureaus.
Credit-Land.com editor-in-chief Michael Germanovsky urges consumers to not fall into the trap of payday loans, and instead apply for a credit card for people with bad credit.
Here is an eye-popping comparison, says Germanovsky, that should convince anyone to be careful with payday loans:
For example, when compared to a credit card cash advance a payday loan may look very attractive to the consumer:
- Typical Interest Rate on a Cash Advance with a Credit Card = 20%
- Typical Interest Rate on a Payday Loan two-week term = 16%
However, if expressed in terms of APR, the truth becomes apparent. The payday loan APR is calculated by multiplying the simple interest by the payday term in one year:
- Typical APR on a Credit Card Cash Advance = 20%
- Typical APR on a Payday Loan = 16% times 26 two-week terms = APR of 416%
"These types of loan situations only end up getting the consumer in more debt," Germanovsky says.
In another prospective, a typical payday loan scenario is when the consumer requests an amount of money upfront and is given cash, and they are then required to pay that amount back plus interest on a specific date, usually in two weeks after the cash was given. The problem with this picture is that most consumers who sign up for payday loans have bad credit and haven't established good spending habits.
Germanovsky continues: "With the high interest rate on payday loans causing more debt accumulating each term, these consumers quickly fall into a circle of unpaid debt, sometimes resulting in bankruptcy. Unfortunately, with payday loans, consumers are subject to random rates on their bill, penalty fees, and aggressive collection methods. Check out Credit-Land.com for a comparative list of all the best credit cards to build credit, and other important credit card nuances, before choosing your next payday loan."
About CreditLand.com:
Credit Land is an award-winning company that has monitored the personal finance industry since 1999. The company systematically gathers, records, and analyzes data relating to personal finance products and services. The goal of industry research is to identify and assess how changing financial regulations and geopolitical events impact customer behavior and banks' marketing strategies. Based on industry research and new technologies, including proprietary analytical software that allows tracking of the consumer from initial product search to the final moment when a consumer makes a decision to submit a credit card application, Credit Land has developed a card rating system that helps consumers evaluate credit cards for every need, including low interest credit cards, small and large purchase, balance transfers, rewards, and improving your credit history.
Contact Details:
Credit-Land.com Inc.
2751 S Ocean Drive
Suite 1202 South
Hollywood, FL 33019
Phone: 1-888-281-1556
Email: Email
Website: http://www.credit-land.com/
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