By Sharon Omahen
University of Georgia

If the holiday spirit led you to overspend this season and now you're left squeezing your remaining dollars until payday, don't resort to a payday loan as a solution, a University of Georgia financial expert warns.

"Payday loans are VERY expensive credit," said Michael Rupured, an Extension financial management specialist with the UGA College of Family and Consumer Sciences. "

Payday loans, also known as "cash advance loans" and "direct deposit loans", generally target low-income, less educated, and non-English speaking people, said Rupured.

Unbelievably high annual percentage rates

"The Annual Percentage Rate on these loans, on average, ranges from 300 to over 1000 percent," he said.

The requirements for these loans are minimal; you must have a checking account, a steady job and earn at least $1000 a month in income. The loan funds are typically deposited directed into your checking account.

"In most instances, people who cannot get a loan from a traditional lending institution will be approved for a payday loan," Rupured said. "However, these people may have serious problems paying back a high-fee loan so fast. The fee is often $20 to $30 per $100 borrowed."

Once the term of the loan has been reached (usually when you receive your paycheck), the company withdraws the loan amount, plus a fee, from your bank account.

"In many cases, the borrower can't pay back the loan because his paycheck will not cover the amount borrowed and the fee," he said. "Borrowers may then get a loan extension, which adds more fees and puts them into deeper debt."

Think long and hard before you sign up

The best advice for someone looking for a short-term loan is to evaluate the options and the consequences.

"Think long and hard before considering a payday loan as an option," Rupured said. "Other options include borrowing from a relative or friend, bartering for the needed product or service, or saving to purchase at a later date."