A Payday Loan Explained
Payday Loans, also known as cash advances, are short-term personal loans usually paid back on your next payday. As a result, they can be highly criticized for being risky, especially for borrowers with poor credit, who might not have an alternative for quick cash. Nonetheless, there are times when a payday loan can be the only way to pay for unexpected expenses and is certainly worth considering if you require some fast money.
The terms and interest rates associated
with a payday loan are usually very flexible, which makes it appealing to a lot of borrowers. For example, a one-time payment of up to $300 is generally required to obtain a payday loan. The amount is based on the applicant’s paycheck stubs, bank account balance, and other personal information. The interest rate can range from a low of 2.9 percent to a high of 18.2 percent. Typically, it’s usually best to pay back the money within 30 days, so that you won’t be charged any late fees.
Although some people
are wary about applying for payday loans because of the high-interest rates, there are ways to avoid excessive fees. First, be sure to apply for a loan with a reputable company. It’s also advisable to research the company’s fee structure online before making a final decision. Some companies will charge a “complex” processing fee, which can increase the actual amount of the loan by several hundred dollars, making it much more expensive than it appears. It’s also a good idea to read the fine print on the application since this will outline all of the terms and conditions that apply.
Payday Loans are popular
for providing short-term financial relief, but borrowers must be aware of their repayment terms before applying. Payday loan companies are not allowed to charge a fee until the full loan is repaid, so it is in the borrowers’ best interest to repay the entire amount inpromptlyIt may be tempting to take the money right away, but this is probably not a good idea, since most payday loans have a repayment schedule that requires a minimum payment of two weeks before the lender will give away the money. Once the money is borrowed, the lender has complete rights to do whatever he or she feels necessary to repay the loan.
Another option available
for borrowers who need money to cover an unforeseen expense is to take out an installment loan. Installment loans are similar to payday loans, but instead of borrowing money once and repaying it at the end of the month, installment loans require borrowers to repay the full amount over a specified period of time. These loans often come with a fixed interest rate and a one-time payment that is due when the loan is made or received. If the borrower is behind in payments, the interest rate may increase substantially. Because these loans carry small penalties for late payments, they can be a useful alternative to payday loans.
Although many people view installment loans
as a convenient way to borrow cash, there are some risks involved in this method. Payday lenders can charge hefty interest rates and fees, which can sometimes make them more expensive than traditional personal loans. When you borrow money to pay off an installment loan, you may also be charged fees for paying back the loan earlier than the specified deadline. If you are unsure about how much time you have left to repay the loan, it can be wise to borrow money from a friend or relative, since payday lenders often impose reasonable late fees.