A Helpful Guide to Payday Loans

6:00 PM Posted By Unknown

You have probably heard of payday loans in the past, but many people carry common misconceptions as to how they actually work. If you are interested in finding out more about payday loans, there are some basics that will be very helpful to be familiar with. There certainly are tradeoffs when using short term credit and it is important to be familiar with what the pros and cons are with the different types of payday loans available. Overall you will be able to evaluate for yourself the costs and benefits of taking out these loans, as well as possessing the ability to determine if the payday loan provider you are interested in is a reputable one. With all of this information in hand you can navigate the payday loan research, application, and repayment process with a great deal of confidence, hopefully resulting in an altogether pleasant borrowing experience without very much stress over whether or not you borrowed from a good lender or are unaware of what you signed up for.

What Is a Payday Loan?

A payday loan is a form of credit intended to provide quick cash with a short borrowing period before repayment. They are called payday loans because they are intended to be used as a means for relief for someone who has regular income but needs cash before their next payday. Traditionally these loans were given in exchange for a post dated check, usually made out for your next payday, however now that these loans can be acquired over the internet it is more likely to have the lender set up a charge to your bank account electronically for the date of your next paycheck. The amount you can borrow is often either the amount of your next paycheck or less. While the usual period for these loans is 14 to 30 days there are many lenders who allow extensions in emergency situations. These extensions come with extra interest charges though, so it is best to plan accordingly and have the ability to repay the loan on the originally scheduled date. These loans are designed for emergency situations, such as medical emergencies, unexpected childcare expenses, paying to get your primary mode of transportation up and running, or unforeseen educational expenses.

Risks and Benefits

The risks of benefits are usually identified with the high interest rates compared to other forms of credit and the fact that some people borrow but have to keep requesting extensions on their repayment, creating a sort of cycle of debt for those individuals. The high interest rate is understandable, given the risk that the lenders are taking by lending to people without a credit history check, without any collateral. What is rarely considered is that you would be paying a great deal more in bank overdraft fees, missed payment fees, and late fees on bills that would not get paid if you did not have the cash on hand.

The benefits are obvious, you get the financial relief you need instantly, allowing you to get back to your life and resolve whatever emergency you might be dealing with.