Payday loans have become very popular these days for people who need a small amount of cash advanced to them. Payday loans help cover those unexpected expenses, anywhere from auto repairs to medical bills.
Unfortunately the high interest rates of payday loans means that borrowers can easily find themselves trapped in debt if they cannot afford to pay the loan back. The interest rate of a payday loan can range from 300% to 900% depending on the lender and the amount borrowed.
With such high interest rates, it is easy to see why many people consider payday loans to be a scam. But let’s take a closer look.
Those interest rates quoted above are what they are when compared to an APR on a normal loan. Because payday loans are meant to be short term, this is an unfair comparison.
If the loan is paid back in the short term that was set with the borrower and the lender, this high interest rate is nothing more than a higher price paid for the convenience of such a loan. It doesn’t end up costing the borrower much more than usual. The sad fact is that many borrowers are anxious to get money and don’t look at the fine print and are quite irresponsible with their loan.
The benefits of payday loans are the ease of applying, the quick cash in hand and they are good for people with bad credit history. Most lenders don’t even look at a credit report. It is important that no matter if your credit is good or bad, that you make sure you are able to pay the loan back when you are supposed to.
If payday loans are so risky, why are they so popular? The flexibility of a payday loan is what makes them popular with most people. They can be used for any purpose and the lender does not even inquire to what that purpose might be. Most approvals are instant and the cash is in hand within just a few hours.
There is also the ease of getting a payday loan online. If borrowers are looking for a quick, no hassle payday loan, getting one online is the best choice.
Faxless payday loans require no documentation to fill our prior to the application. Most borrowers are in need of the cash advance as soon as possible so this is a very attractive feature.
As you can see, payday loans are a double edged sword. On one hand they do charge higher interest and fees than traditional loans, and can become a problem for the borrower if he is irresponsible. On the other hand, they fill an important role in the market allowing responsible borrowers to get a hold of cash very quickly when the most need it.
If you decide that a payday loan is what you need, then make sure to read the small print and go over the terms of the loan with your lender to make sure you are clear about everything. Most people who get into trouble with payday loans are the ones who do not heed this advice or even think to go through the details. If you ensure that you can pay the loan back when it is due, then a payday loan could be a very useful financial resource for you.