There are times when you might undergo a financial exigency. Such conditions might crop up due to a number of reasons, ranging from a medical emergency to an urgent need to repair your car. At times, you might be left with a little or no savings to do the needful. Under such circumstances, payday loans can be a lifesaver.
Understanding Payday Loans
The general purpose of payday loan is to give a quick way to obtain easy money, so that the minor emergencies in life can be taken care of. Basically, payday advance refers to a loan that you obtain from different agencies, such as a loan store. However, no banks offer such loans. It is named so, because the scheme allows you to borrow an amount that is just sufficient to manage till your next payday. These loan businesses might accept postdated personal checks for collateral. The lending agency holds onto the check. It is cashed on the date agreed upon. Such loans are also styled as check advance loans and cash advance loans.
Perhaps, the surging popularity of payday loans lies in their accessibility and convenience. Payday lenders work longer hours than that of banks. In fact, many of these agencies offer their services 24/7. Plus, they can be found in many convenient locations. Payday loan lenders are also known for their “open-mindedness” towards their clients who have fallen to bad debt. These lenders are rarely known to check their clients’ credit. Moreover, the process of loan approval is really fast! You can get your application approved for a time as short as half an hour! And in most cases, the money gets automatically deposited in your bank account within a day.
Does Payday Loan Work For All?
Pay day loans also have some disadvantages. For example, you might need to pay a hefty amount of money for interest against the loan secured. Sometimes, the rate of interest gets as high as 400%! Apart from the unbelievably high rate of interest, the lending agency can also charge other expenses, including closing costs, prepayment penalty and the like. And when it comes to high risk loans, these charges can be extremely high. No wonder the situation goes worse for defaulters. The trouble does not stop here. Borrowers are often seen to avail multiple payday loans to close the existing bad credit installment loans. This is a common picture among defaulters and individuals with poor credit, who find it tough to make the necessary financial arrangements for repayment. This obviously gives way to a number of risks.
The Truth About Payday Loans
Experts have referred payday loans as a “financial taxi,” something that is only effective when taken to meet minor, short term cash requirement. Just as travelling in a cab is convenient for travelling short distance; availing payday loans can be handy while meeting short time monetary needs only. However, a cab-service is not economical, especially when it comes to a long-distance journey. Similarly, payday advance can bring a serious blow to your budget management, provided you take them continually. So be responsible while using payday advance.