Many critics have given payday loan a bad reputation. However, payday loans can meet a real need. They can be used to provide short term financing for people who are unable or unwilling to obtain loans from banks. Borrowing money can be difficult for those with low incomes or bad credit ratings. But there will be times when they have to finance a small amount.
Are payday loans really as bad as some people think? Or are these short-term loans a valuable safety net for the less-well-off? Payday loans are real. Apply Now ($255 Payday Loans Online Same Day)
Payday Loans: What Are They?
Payday loans are short-term loans. You can get them online or at loan stores. Payday loans can also be called cash advances, cash loans, and check loans. Payday loans are typically repaid in full on the next payday. The name is derived from this fact. Some lenders will even require a postdated check to cover the repayment, while other lenders use access to your bank account to recover repayment. Many lenders offer several repayment options.
How Expensive Are Payday Loans?
Payday loans can be quite expensive. This is especially true when compared to traditional bank loans. Annual percentage interest rates (APRs) can go up to 1,000%. The interest fees are expensive but remember that this rate is an annual rate which means what you would pay in interest fees over a full year.
Payday loans are short-term loans which typically are to be repaid in two to four weeks. This means that you will not pay as much interest as if this were a long-term loan. If the borrower defaults on repayments or rolls over the loan, there are usually more high fees.
What Makes Payday Loans So Expensive
People with low incomes often get payday loans. Many times, they are not subject to credit checks. Payday lenders argue that payday loans have a high-risk factor, which justifies their high price. Some may argue that payday lenders exploit the poor but for those who cannot get traditional loans it remains a great option. For example, if you cannot afford to pay for your medical treatment, you may be willing to borrow the money.
Why is Payday Loan Reputation so Bad?
Payday loans have a poor reputation because they can lead to a spiral of debt. One person who cannot pay $100 for a single month’s expenses is unlikely to be capable of paying the same amount next month.
Payday loan holders can then rollover their payday loans. Most often, there is a charge and an increase of the interest rate. Sometimes people borrow from one payday lender to repay another. They don’t pay off the debt and they are expensive to keep long-term. Payday lenders have a reputation of aggressive collection methods.
Much of this reputation is blamed on the lender due to high interest rates but most times you have irresponsible borrowers who borrow more than they need for a short-term expense, or the repayment terms are outside their debt-to-income ratio.
Payday Loans: Why People Use Them?
Some people find it difficult to see how payday loans could have any benefits. Why borrow $500 at high interest rates when you can buy the items you need with a credit card? Many people don’t have access credit cards.
Payday loans are sometimes the only solution for certain people. Payday loans can be used for emergencies. Payday loans are used by people who need cash to repair or replace their heating system. Problems arise when payday loans are used to pay for living expenses or if the loans are not paid on time.
What Benefits Are There to Payday Loans?
Payday loans are simple to apply for and you will usually receive the cash in your bank account within the next business day and in some cases the same day depending on the time the loan process is completed. Payday loans are a great option if you need short-term financing for an emergency. These loans often come with no traditional credit checks.
A traditional credit check is typically what is conducted by a bank or credit union, and this can damage your credit even more. Payday lenders do what is called a “soft credit check inquiry”. This type of request allows the lender to determine if you are a high risk in terms of repayment but does not affect your credit score. This makes them appealing to those who don’t have a good credit rating.
What Drawbacks Are Payday Loans?
Payday loans are a very expensive way to borrow funds. You must repay your payday loan on time, or you will be charged more. Borrowing cash from another source is preferable if possible. You could borrow the cash from a friend, family member or credit union.
Many times, you can also negotiate payment terms and conditions with utility providers. A payday lender might be your last resort if none of those options are available. As long as the loan is repaid on time, it’s okay. You should not take out a loan from a payday lender who is not reputable and trustworthy. Before agreeing to a loan, shop around and compare interest and fees.
Finally,
Payday Loans can be a good or bad way to borrow cash depending on the amount borrowed and a borrower’s debt-to-income ratio. But they are an option for some people. Payday loans can be used to obtain emergency cash to pay your urgent bills. Payday loans are a good option for those who need short-term emergency financing. It is important though to consider that they do come at a very high price.
Be a responsible borrower by following the below guidelines that will help prevent from defaults.
Only borrow the money you need. These are short-term loans and are to be used as a last resort option to get the money you need for emergency situations.
Make sure you can repay the loan within the repayment terms. Payday loans are required to be repaid within two to four weeks and so it is important to understand the amount with interest you are required to repay fits your budget during this time period.
Make sure the lender you are borrowing from is reliable and trustworthy. There are a lot of illegitimate lenders on the internet so make sure you do your research to find one that is reliable and trustworthy. Make sure they list an APR disclosure on their website, so you know before you apply what you are signing up for.
Speaking of signing, make sure you fully read and understand the terms of the agreement before you sign the contract. If you have questions or concerns address those with the lender before signing and if you are uncomfortable with those terms walk away.
Many blame the lender for the reason payday loans have a bad reputation, but the borrower holds the same responsibility to make sure they can repay the loan and prevent falling into a cycle of debt.
Payday loans are a great opportunity for many who live paycheck to paycheck and due to poor or bad credit concerns are unable to find a bank or credit union that will lend to them, so payday loans serve a great service to these people. ($255 Payday Loans Online Same Day)
