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What You Should Know Before Getting a Payday Loan

NEW YORK (TheStreet) -- Payday loans are tough on the economic landscape, whether the 20 million loan recipients know it or not.

Chances are, they don't know it -- otherwise why would they agree voluntarily to a deal that's also designed to separate them from more of their money?

The Insight Center For Community Economic Development in Oakland, Calif., estimates that payday loans cost the economy about $1 billion and, as a result, more than 14,000 jobs while consumers take on so much payday loan debt that they lose $774 million in spending ability. Bankruptcies linked to such loans climbed to 56,230 in 2011, the center reports.

Available in 33 states, the loans also come with huge interest payments, amounting to $375 on average.

"Payday loans are an ongoing problem and an economic drain," says Tim Lohrentz, lead author of the Insight Center study. "The amount is not huge in the big picture of the total economy, but it's big enough."

The association billing itself as the "national organization" of payday lenders -- the Community Financial Services Association of America -- has taken a long look at the "experiences and rationale" of payday loan consumers with the help of Harris Interactive.

Don't expect a poll that views the industry in a negative light, obviously. But the group's survey insists that consumers are getting a good deal from payday lenders, noting that 91% of loan customers say they are "satisfied" or "very satisfied" with their payday loan experience. Additionally, 95% say they don't want the federal or state government getting in the way of their payday loans.

Whatever you feel about any of the above statistics, go into a payday loan deal with your head up and your hand firmly on your wallet or pocketbook:

Know your state law. Of the 33 states that do allow payday loans, some have caps on the amount of interest the provider can charge. Check with your state's attorney general's office to see if there's a rate limit on your loan.

Don't bounce a check. Always cover a payday loan within the agreed-upon repayment period. When you do, make sure you have the cash in your banking account to cover the payment. Bounced checks can lead to huge fees from loan providers.

Consider a credit card advance. Instead of a high-interest payday loan, consider a credit card loan advance. You'll pay high rates -- but not as high as a payday loan. And you'll likely have a longer repayment period.

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