Payday loans or cash advance are an excellent way of making ends meet between pay checks. Or are they? Cash advances which are also known as check cashing, payday loans, payroll advance loans and deferred deposit loans are all high interest loans that can be obtained easily in a short space of time. Obtaining any loan is simple, payday loan companies can be found all over the internet, all it takes is a simple search and all you will need is a job and a bank account. The first process entails finding a company you wish to do business with; second process is filling out a simple application giving your employer and bank account information. It usually takes around sixty minutes to find out whether you have qualified for the loan, the loan company will need to verify your employment and bank details. Funds are usually made available the next working day providing the application was submitted before 3pm. The terms for a payday loan is typically the same, with some small variations, so make sure you check each individual company before applying for a loan with them. There are generally three payment options to choose from when applying for a loan:

1. Pay only the Interest and renew entire Principle

2. Pay down on Principle (increments of $50) plus Interest renewing balance of Principle

3. Payoff of Principle and Interest in full

The interest rate for these type of loans is anywhere form 391% APR to upwards of 800% APR. If you obtain a loan for $300, your interest will be around $90 for a 14 day loan, leaving you owing $390. When you next pay period comes around, you pay only the interest and renew the principle. The loan company will then withdraw $90 from your bank account, leaving you with a new balance of $390 for the next pay period. It is extremely difficult to get out of these types of loans once you get started with them, especially when you consider how easy it is to go out and get another payday loan from an entirely different loan company and before you even know what your doing, you are paying $500 - $1500 per month, just in interest fees and never being able to pay the actual principle or any other bills you may have, for that matter, which essentially completely defeats the purpose of acquiring the loan in the first place.

A payday loan should be avoided at all costs. If you find yourself short on funds, take a closer look at your situation. Ask your employer for an advance on your pay check, there would be no interest or fees and a lot of employers are rather sympathetic, so it never hurts to ask. Another option you could take would be to talk to your bank or credit union about Ready Reserve of overdraft protection for your account. This is basically a low interest loan attached to your account which pulls money over to your account, usually in increments of $500, which is in case of negative balance therefore causing your account to stay in the green, preventing you from having to pay all the overdraft fees. The bank will automatically withdraw a small amount (about $15 for a $250 loan) per month from your account, putting it back into your Ready Reserve account for you to use again in case your account goes into the red again. Ready Reserve is considered revolving credit as it is not a term loan but continuous and can be borrowed from again and again.