9 Dumb Ways to Borrow Money -- and 4 Better Choices
Some of the worst loans possible:
1. Payday loans. Payday loans have a bad name. Here's why: The finance charge can run $10 to $30 for every $100 you borrow. That's an APR of nearly 400 percent. That makes even credit card interest rates -- usually between 12 percent and 30 percent -- look good.
Payday loans (or "cash advances") are small, high-interest loans repaid from your paycheck. Typically you borrow $500 or less. You may have to give the lender access to your checking account or write a check for the full loan amount for use in case you miss a payment.
Payday loans typically are due in full from your next paycheck. Some, though -- for bigger fees -- offer interest-only payments (or "renewals" or "rollovers") or may be repaid in installments over time. The Consumer Financial Protection Bureau has a detailed description.
Payday loans can get borrowers into deep trouble. "If you roll over the loan multiple times it's possible to pay several hundred dollars in fees and still owe the amount you borrowed," says the CFPB, in a warning about rollovers. Some states ban rollovers.
