Payday loans when used wisely can be a blessing. A payday loan can solve an unexpected financial obligation for the short term.

When they are used foolishly, however, payday loans can be anything but a blessing.

A payday loan can put the borrower in the position of needing to “borrow from Peter to pay Paul.” First of all, the interest rate on payday loans is exorbitant.

They don’t sound exorbitant when you say it fast - the interest for a loan of $100 would be 15% - but the FULL 15% is for a two-week period rather than an Annual Percentage Rate, or APR.

Then if the loan is “rolled over” or extended beyond the original two-week period, an additional fee is charged plus another 15% is added. It doesn’t take long for a borrower to owe twice the original loan amount - or more.

Now, I am not saying that all payday loans are bad. I am saying that you should very carefully consider your options, and a payday loan should probably be at the bottom of your list of possible solutions for a temporary financial crisis, simply because borrowing the money is too expensive even if you pay the loan off on time.

Interest of $15 for a $100 loan for a 14-day period is really, REALLY high.

A payday loan is basically a cash advance on pay that you have not yet earned. The way most of these payday loans work is that you give the payday lender a personal check in the amount of $115.00 that he will hold for two weeks, and he gives you a check for $100 which you can cash now.

Sometimes funds are transmitted electronically to bank accounts, but the principle is the same.

Milos Pesic is a Certified Financial Planner and Debt Management Consultant who runs a highly popular and comprehensive Payday Loans web site. For more articles and resources on instant payday loans, bad credit payday loans, faxless payday loans and much more visit his site at: http://paydayloansofficial.com