Payday loans are a relatively new invention and financial tool introduced in the late 1990s that have quickly grown into a multi-billion dollar industry. They allow individuals who struggle to manage their finances on a day-to-day basis to borrow money with an agreement of repaying it in 10, 15, or even 30 days after they receive their next paycheck.
Most payday loan companies claim that they can provide this service because they are non-profit organizations. If you take the time to research your options, however, you know that this is not the case.
In fact, payday loan companies are a direct competitor to paper-based banks. However, unlike traditional banks, they don’t provide the same level of basic services provided by a fully functioning financial institution. The main difference between these two services is in fees and charges. Why does one need a loan?
-To buy a car
-Fix your roof
-Pay off your mortgage loan
-To make sure you don’t default on other loans
-For the summer vacation that you have been saving for all year long.
How do payday loans work?
One can apply for a loan through online websites or via telephone. A payday loan is quickly reviewed by an online service and the applicant get instant approval. The standard rate for the loan ranges between 7% – 16% per month, depending on the interest rate set by the lender.
The applicant needs to pay back the lender at least 4 times a month and as soon as possible after receiving the money. In return, the applicant gets the initial funds.
Things to consider about payday loans
One of the things that people who borrow money from loan companies fail to take into account is how the company’s interest rate works. The same is true for other types of banks, which may have higher interest rates than payday loan companies. But some lenders such as Canadian Cash Solutions offer genuine and competitive interest rates.
This is a particularly important point since payday loans have traditionally had higher fees and charges than banks. What are the negative effects of these loans?
Families and friends can’t lend money to create a buffer in case of an emergency, which means that they have no choice but to live with less. Credit card companies don’t help you with such emergencies, and you shouldn’t expect any help from banks either.
However, compared to other types of loans, payday loans may have some advantages. They can be forgiven if the applicant stops paying them on time or forgets that he needs to do so.
What payday loans cost you?
Because payday loans are short-term, they cannot be compare to long-term loans.
One dollar of credit will last as little as 24 hours. This means that the borrowing amount will need to be increase in the event that it is not enough. This means that you will end up paying more for the same money. Then if you had borrowed a larger sum from a bank or an insurance company.
These loans are especially costly when they are used by applicants. Who do not pay them back on time and break their loan agreement. Some loans include additional charges for late payments, which can add up to 25%.
However, the borrower can benefit from paying on time and not having to worry about repaying the loan for a while. It also includes payments such as:
Recurring payments – This is an additional fee that a borrower will have to pay if he fails to pay back the loan on time, as it does not include fees or additional interest rates.
Penalties – These are applied whenever the loan is paid back late or not at all. Penalties can vary from 1% – 5%, depending on the loan company.
Payday loans are considered one of the most expensive types of loans since they tend to have much higher interest rates than other types of borrowing options, such as bank loans.
What do you need to know about payday loans?
These companies may have various requirements regarding the credit score of borrowers. They will also ask you about your employment status and your income. They want proof that you’re capable of paying back a normal bank loan. But they also recognize that unexpected expenses and situations may arise in peoples’ lives.
You will also need to pay for some other additional fees. These include a late fee if you overdraw your account by over $100 and a higher interest rate fee if you submitted your loan request online. Since there are numerous companies that offer payday loans, the standard rules for credit score may not apply to everyone.
If you look at online payday loans, the interest rates are higher and the time frame is shorter than with traditional bank loans. However, it is always necessary to read the terms and conditions to see what each company’s policies are.
You should check out other options for getting a loan if this type of borrowing doesn’t work out. This may be a way to pay some unexpected bills that have cropped up in your life.
If you make extra payments on time and stay on top of your payments. You’ll have no trouble repaying your payday loan. If you don’t try to pay back the loan on time or if you don’t pay back the amount in full. You should expect a large penalty fee.
Alternative options of Payday Loans
Of course, you can always look around for alternative options to payday loans. You might want to take a look at the online tools available in the form of instant cash advance loans. These are usually short term loans that are easy to get and will help you tide over your current financial needs. Until normal money becomes accessible again.
You will also be able to get some extra money by applying for a secured personal loan with no collateral or only a small amount of property as collateral. This is a good option for people who want a little more money than payday loans can give them.
You should always make sure you do your research before deciding on whether or not to take out a payday loan. You need to know where you can go for the best deals and the most help in paying off your loan.
Online payday loans are helpful to many people, but they also have some drawbacks. If you have a bad credit score, it may be hard for you to get approval for this type of loan. When you look at online companies and their rates. You’ve got to put everything together and make a good decision about the amount of money you can afford to borrow.
Payday Loans – Easy Money and Hidden Dangers
Since the beginning of time, people have always been under the pressure of constant financial instability. Some were poor, some were rich. However, there was one thing that remained the same – money never grew on trees. It had to be earned with much effort, sweat and blood.
Why Choose Payday Loans?
They are comparatively more affordable than bank loans, but they still come with a higher interest rate.
They are cheap compared to other types of credit and a great option for people who have a very little credit history.
In case of emergencies, these can be a lifesaver for consumers who need cash in an instant.
Advertisement can be extremely expensive, and therefore the interest on payday loans tends to outweigh the interest rates on overdraft fees applied by most banks. Choosing a type of financial product totally depends on you and your situation. Thus, get the one that can help you deal with your financial problems.