These days, payday loan offers almost everywhere. From the internet to the local strip mall, the industry of payday lending is booming. But, what makes a payday loan so popular? Is it really helpful for everyone’s financial needs?
Payday Loan – What Is It?
A payday loan can be very expensive. Borrowers must use these with caution and pay the amount as quickly as possible. Payday loans are typically priced at a fixed dollar fee that represents the finance charge to the borrower. Since this is a short term loan, the cost of borrowing this is extremely high. In return for the loan, borrowers typically provide the lender with a pre-dated debit or check authorization.
Who Can Use Payday Loans?
Generally, payday loans are for everyone with a steady income and a checking account. But, it’s most common for people who do not have access to savings accounts or credit cards to use this kind of lender. Since such loans never require a credit check, those who have no credit or credit issues often consider payday loans.
The Benefits of Payday Loans
Payday loans are a great tool for easily and quickly borrowing cash during emergency if you do not have some financial options. For instance, you could use payday lenders for a quick and temporary financial need including car repairs, medical bills or some one-time expense. Payday loans are also helpful for those who do not have savings or credit cards available. Since the loans don’t require a credit check, it’s a convenient option for some who have financial problems.
The Negatives of Payday Loans
It is important that you repay payday loans at the soonest date. Tons of people get into trouble with these kinds of loans when they are can’t quickly repay the debt. If you cannot repay the loan at the end of the term, you will be charged costly additional fees. It’s very costly to be stuck in payday loan cycle and could lead to bigger financial problems.
Payday loans are also expensive compared to other ways of borrowing money. In most instances, the APR or annual percentage rate on payday loans are about 400 percent, yet the APR is frequently as high as 5,000 percent. The standard credit card has APR of 12 percent the standard loan APR is 7 percent. If possible, it’s better to tap in your savings or use your credit card in case of an emergency.
Should You Apply for a Payday Loan?
If you have financial issues and you have to resolve it at the soonest date, a payday loan is always a good idea. But, before you apply for payday loans, step back and consider some options. Ask yourself if this is really an emergency. Payday loans may be helpful for 1-time emergency costs including medical fees, yet aren’t a good idea for funding some unnecessary expenses. If there are some alternatives available, consider them before you apply for a payday loan because some financial options might offer you much convenience.