Saving on High Interest with a Payday Loan


Almost every person has at least one credit card and while some have good interest rates, most do not. Unfortunately, the amount of interest a person pays on credit cards has a direct correlation to the person?s credit score. A person with great credit will be offered the lowest rate available while people with poor credit are charged 22% and more. Regardless, most people paying high interest rates on credit cards have a solution with a payday loan.

Taking out a payday loan to pay off the credit cards with the highest interest rates will actually save that person a tremendous amount of money if handled right. Even if every credit card could not be paid off, some could. Best of all, a payday loan is easy to get, even for people with bad credit. Additionally, this type of loan typically has a lower interest rate so it makes perfect sense.

For a person with a credit card that has a 22% interest rate, even if the owing balance were just $1,000, paying the minimum amount due every month would stretch that one card out to almost 10 years. In other words, the money being paid each month is doing nothing because the high cost of interest is where every payment goes, not the principal balance. However, if that same person were to take out a payday loan to pay off the balance on the card, chances are with a lower interest rate, money would be saved.

Now, some brick and mortar, and online lenders of payday loans come with extremely high interest rates so anyone considering this option needs to take his or her time to shop around. While it might take a little more work and effort, finding a loan such as this with a low rate is worth it. People need to remember that this kind of loan is calculated using an Annual Percentage Rate so some are high but again, some are highly reputable lenders that offer great deals.

While the average payday loan ranges from $100 to $1,000 and stretches out over a two-week period, some go longer. For a person that has an upcoming bonus or has taken a great job but is stuck with credit cards that have outrageous interest rates, a payday loan might be the answer that person has been trying to find. In this case, the individual could pay off the one credit card that is sucking them dry and within two weeks, have the loan paid off and find him or herself in a much better financial situation.

The way a payday loan works is that the person wanting to pay off a high interest rate credit card would find a reputable lender with great rates. From there, the borrower would provide the lender with a personal check to cover the amount of the loan plus the charges. In return, that person gets cash to pay off the credit card. If the borrower chooses an online lender, then he or she would sign over access to the personal bank account electronically.

The lender of a payday loan would require proof of the borrower?s job and income, age in that he or she would have to be at least 18 years of age, and proof of US citizenship. Then, the personal check written would be held onto until the borrowers next or an agreed upon payday rolls around. At that time, the payday loan company would cash the check and the loan would be deemed paid off in full.

In addition to paying the payday loan off in the above manner, a person has two other choices. First, the borrower could contact the lender to advise that cash would be taken in to pay the loan at which time the original personal check would be returned. Second, if the borrower realizes that he or she needs more time n which to pay off the loan, then he or she could pay the fees associated with the loan and have the principal amount extended.

In the second scenario, some lenders will create an interest free period, which allows the borrower time to get the loan paid off but without additional fees being added on. However, most lenders would eventually start the process of charging interest so if the individual were not careful, he or she could end up in a situation of paying more than necessary, defeating the original purpose of getting a high interest rate credit card paid off.

While a payday loan to pay off credit cards is not for everyone, it works in many situations. Again, the individual needs to make sure that he or she is working with a reputable lender and that all the fine print of the loan is read. That way, the credit card is paid off, the loan is paid back, and the overall experience succeeded.