Payday loans are popular even though they are banned in some states. And this is not surprising. While banks are resolutely refusing anyone whose credit history is questionable, people still need extra money. Life is full of sharp turns, and you never know what will happen tomorrow. Sometimes even savings cannot help cover medical bills or car repairs. And in the current economic situation, these savings still need to be made, which is not so easy.
Some people find salvation in payday loans. Some fear them like fire. Why such different opinions, and who is right?
What is a payday loan?
A payday loan has several different names, but its essence is the same: it is a short-term loan for a limited amount that does not involve multiple payments; you will need to repay the entire amount.
Payday loans do not require collateral, they can be obtained quite simply, but you should not count on big money.
Typically, lenders offer up to $500, with a maximum of $1,000, but you still need to try to find such an offer.
There are reasons for limiting amounts. And that's the terms of the loan. Usually, a payday loan is available for 14 days, sometimes - for 30 days. It does not provide for extensions, although some lenders may offer such an option. However, extending the loan length will cost you a lot of money compared to the amount you borrowed.
But, perhaps, the main drawback is still the interest rates on payday loans. They start at 36%, depend on lenders and even the state you borrow from, and can go up to really high numbers like 300%. In addition, some lenders charge various fees that increase the loan cost. So before applying, you need to carefully read the loan agreement - by law, lenders are required to report all fees, fines, and other additional payments.
Is it really easy to get a payday loan?
You have probably heard that getting a payday loan is easy. And this is partly true, especially when compared with obtaining, for example, a personal loan.
Let's start with the fact that the list of documents that are required to obtain a payday loan is very short, including proof of identity, proof of income, and email with a phone number and address.
In addition, payday loans can be obtained online. You can do it on your computer, and you can even download the application for your mobile phone. Progress has long gone far, and payday lenders are exactly on top. You can just take a taxi, sit at home or at work and, after spending about ten minutes, apply for a loan. It does not go into any comparison with banks, their checks, waiting, and so on.
Speaking of waiting. A payday loan allows you to receive funds within 24 hours after applying. Money can come to the account even on the day the loan is issued. No other loan can boast of this if you do not take pawnshops into account. But, I repeat, no collateral is needed for a payday loan.
The main danger of a payday loan and how to avoid it
Of course, the most negative in a payday loan is called rates. And they can be really high. But you are ready for them, you know about them. The most important thing when you take out a payday loan is to make sure that you pay it off on time. There should be no "maybe" and "probably." Just unwavering confidence. Because delays and prolongations can cost you a lot, and then you will really regret that you agreed to a payday loan.
But if you have calculated your budget and know that you can repay loans on time or even earlier, then there is no reason to be afraid of a payday loan.
A payday loan is an easy and quick way to get a small amount of debt for emergency expenses. It does not require a deposit and a large number of documents for registration, and you can receive the money within 24 hours.
It is important to be sure that you will be able to repay such a loan on time. In this case, you will not fall into a debt hole and will not be forced to overpay fees and fines.