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Tuesday, September 12, 2006

The Dangerous of Payday Loan
Payday loans are small, short-term loans and high-interest loans. Usually, a customer writes a post-dated check payable to the payday lender, then receives cash for the amount of the check minus the lender's fee, which typically is about $15-$30 per $100 loaned. The loan is due on the date that appears on the check, usually about two weeks later.

Problems arise when a borrower fails to pay back the loan within the agreed-upon time period and refinances over and over, racking up new fees.

Credit counselors and advocacy groups for the poor say that payday loans are designed to trap and financially drain the desperate or unsophisticated.
But payday lenders say they offer emergency help to people with no credit, and their loans are cheaper than paying fees for bounced checks or for restoring disconnected utilities.

At the other side, the borrower need it because they need money - now.Because they are vulnerable, they are susceptible to high fees. Because of the high fees, they are tempted to borrow again. For many, what began as a short-term problem quickly turns into a long- term nightmare.

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