Payday loans are usually short-term, small loan that is available to those who cannot pay their credit obligations when they become due.
Customers repay the principal amount and a finance charge within two weeks.
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Payday loans are a popular option for consumers looking for fast cash. These loans have been available for many years and have provided millions of people with access to money they couldn’t otherwise have. It can be difficult to understand the terms “payday”, “short-term”, and “high-cost credits” which are all used in conjunction with payday loans.
These businesses are based on the basic principle that people with small incomes can pay high-interest rates (usually 10% per month).
What’s A Payday Loan?
Payday loans are usually short-term, small loan that is available to those who cannot pay their credit card bills on time. Payday lenders offer small loans that are secured by the borrower’s next paycheck, and not money from a bank with fixed rates or terms.
Customers repay the principal amount and a finance fee within two weeks. Why would anyone consent to this type of loan? This seems counterintuitive. It is a simple fact that 76% of borrowers who have loans due within two weeks are unable or unwilling to repay their full balance. Payday loans can be used to help people get by until their next paycheck arrives.
Payday loans are used by many borrowers to pay for essential items such as utilities and groceries. Payday borrowers are less likely than other types to use their loans to purchase essential items. Because they cannot get credit elsewhere, payday loan borrowers turn to this option. These loans often allow borrowers to access funds quickly, even if they aren’t eligible for traditional bank loans.
Applying For Payday Loans
Short-term loans are often offered by payday lenders to borrowers who cannot get credit elsewhere. Apply electronically with a click of a mouse for a quick 500 loan online now.
The borrower sends a personal check to the lender for the amount of the loan as well as the fees. Loans can be available for as little as a few weeks to as long as a few months. Some lenders offer installment loans with a longer term of up to several years.
Payday loans typically have very high-interest rates (if not an annual percentage) These rates can range from 300% up to 1000%. This is considered “credit insurance” by lenders. Lenders justify high-interest rates by stating that borrowing money to pay rent or car repairs may be required in the event of an emergency.
Important Facts To Note!
Payday loans are characterized by the following:
Payday loans are much easier than other loans. The approval process takes less time. The best part is that there is no need to submit paperwork for approval, unlike bank loans. Lenders may not require a borrower to have a good credit rating to issue a loan.
This industry is dominated by companies operating across state borders that are not under-regulated. They have access to millions of uninformed consumers, who are unable to make informed decisions and take out high-cost loans. These lending practices can trap borrowers in a cycle that leads to more debt.
Payday loans should only be taken if necessary. Look for other options instead. If you don’t have the means to pay for luxury expenses, don’t apply for these loans!
Payday loans are an option. You need to determine how much you are eligible for. There are no restrictions on the amount or frequency that payday lenders can lend to a borrower. Some places limit the number of payday loans that an individual can take out.