Payday loans are considered as short term loans that you can use to support you during tough times especially concerning monetary troubles. There are a lot of people who wish to be in the know about payday loans. Before using payday loans, one must know the involved costs and consequences to avert losing much money. In this article, you can have a quick overview on how a payday loans works. Additional facts and info about the proper use of them and safe business deals will also be tackled.
Definition Of Payday Loans
Payday loans are loans that are normally applied for by people who are in need of some quick hard currency. Payday loans are there for when you are temporarily short of cash and need some for a emergency. The normal time frame for a payday loan is about a couple of weeks. This only applies if you ask to borrow a small amount, like a 2 of hundred dollars.
To be able to ask for a payday loan, the person normally writes a bank check stating the amount to be borrowed which as well includes a fee. Usually, the one who is requesting the loan leaves the bank check with the lender.
But what if you can not repay it on time? You can keep it rolling over and have the loan to be extended. You do not have to repay it at once, although if you do not pay back it all at once, you may find it astonishing that your fees keep on amassing.
Payday Loans Costs
In The Main, payday loans are quite high-priced. People who go into this pay a annual percentage rate or APR that adds up to an overwhelming percentage. Example, if you have borrowed $200 to be paid for in two weeks, you can pay a fee of $40 and if you can not pay back the borrowed amount and the fee on time, you may find it very disturbing to pay a ever raising interest rate. This kind of percentage can be quite alarming particularly for those who can only repay so much.
Pitfalls Of Payday Loans
One of the primary pitfalls of payday loans is that when you take one out it does not really solve your problems. They can make the trouble even worse, this is because of the high interest rate you will be charged. Regardless of what your trouble is, the loan company will not truly care as long as you make your repayments. Because of the high interest rate you are charged on what you have borrowed, instead of helping you it can very often pull you down.
Although, in times of crisis, payday loans can be very helpful. People need to consider all the hazards of acquiring one. Sometimes payday loans make sense most particularly if the individual lending cash requires it so much. This would just apply for short term payday loans. There is a complete difference with long term payday loan.
Problems will spring up, if the bank checks you have written out to the lending company bounce. This will come out on your credit data file and report. The result? You will find that very few banking companies are ready to deal with you.
Payday Loan Alternatives
There are loads of alternatives in exchange of payday loans. These are some:
Having your own emergency fund that will be kept in your savings account but this one’s easier said than done.
Open a credit card for emergency purposes, once again this can be risky, as a lot of people will simply end up using the card anyways.
Get a part time job (but this will take some time and will not be very helpful when a on the spot emergency arises)
Consider a peer lending service for a better and more honest deal.
To sum up, payday loans are perfect in times of crisis or an emergency, but must solely be looked at as a short term answer!
Author: Jacob WilliamsThis author has published 2 articles so far.