What Is A Payday Loan?
Payday loans are short term loans. This is because they have to be paid in a short amount of time, usually no more than a few weeks. Payday loans are paid back in a few days to a week normally. Payday loans are mostly used by people who are in a rough spot financially. It is widely used by people who are in urgent need of money. This is so because they are disbursed almost immediately and to everyone. The documentation required is very less and even the people with bad credit score can avail them.
Payday Loan A Boon For People With Bad Credit!
Payday loans tend to have a higher rate of interest as compared to the traditional loans offered by lending institutions, yet they are pretty common in the United States. The credit goes to the people with bad credit score! Loans are difficult to get considering that you have to pay them back and the banks have to rely on the trust, and obviously your credit score, that you will adhere to the terms and will pay back the full amount with interest in due time.
The documentation required for the payday loans is very less and you don’t have to fax any document. The loan amount would get disbursed to your account immediately. Add to all this, you can avail the benefits of payday loans even if you have a bad credit score! It is for this sole reason that the payday loans are common with the Americans who see it as a great opportunity to solve their financial woes in less time.
Payday loans are a boon to the people with cad credit scores as the lenders don’t check the borrowers’ credit score. Moreover, your defaults on the payday loans doesn’t affect your credit score. However, this should not mean that you will default on your loans. Obviously, just as the banks, the payday loan lenders lend their money to you on trust that you would adhere to the terms and pay back the borrowed sum with interest in due time.
How To Get A Payday Loan?
Nowadays, most of the payday loan lenders are online, though some may be offline too. The first step would be to shop around and look for the different lenders and compare. After choosing the lender you would like to take the loan from, you should check and submit the documents required by the lender in order to disburse the loan to you. You should also get your bank account verified. You should go through the terms and conditions of the lender and especially the rate of interest and the penalty on missing the deadline to pay back the loan amount. After all the documentation is complete, your payday loan lender will transfer the amount to your account, sometimes as fast in a few minutes.
Normally, the process if fast and the payday loan is given to anybody with a particular income, which is nominal which is to ascertain that the borrower can pay back the debt on time or not. There are very few chances that you have an issue in getting a payday loan.
Disadvantages Of Payday Loans
The payday loans come with a very high APR. The interest rates go as high as 1700%. This makes them the costliest loans in the country. Also, the payday loan industry is totally unregulated.
As with all loans, the borrower needs to pay back the amount on or before the due date. If he fails to do so, then he is levied with heavy fines. These heavy fines add to the burden of the borrower. Even if the delay is by a single day, the amount to be paid back is huge because the interest rates are exorbitantly high. This makes the borrowers borrow again and this vicious cycle continues keeping them in debt forever.
This doesn’t mean that one should not avail the benefits of payday loans. You should make sure that you can afford the loans without affecting your normal life or compromising on your daily needs.
The Bottom Line
The payday loans are a boon to people with bad credit score. However, they come at a price. The price is the high interest rates and the high penalty being charged on defaults. These are the very reasons why the payday loans are not promoted. Add to this, many payday loans operating online are a scam and aim to exploit the borrowers.
There are only a few situations where payday loans actually help the borrower in settling his financial woes and leading a happy life thereafter, and not actually ending up in a debt trap. One should always make sure to understand the terms and conditions associated with the payday loans before availing one. One should also assess the risks associated with the payday loans before availing one and always pay back in due time.