II think of myself as a financially well-planned person, however even I have found myself fund deprived at the end of the month sometimes. In my case, the reason for this financial emergency is usually unnecessary retail therapy for many people I know this can be an actual emergency. If the cash shortage is something you can live with uncomfortable you may think to pray for salary day is the easiest option. For people who have landed in this situation due to a more serious emergency may not be able to wait for the salary day though.
If you are in such a financial emergency and cannot wait for your salary, payday loans are the answer to all your prayers and you may need an instant solution. Payday loans simply explained are small amount loans offered to you for a short duration of time and a high rate of interest. These loans are not operated by traditional banks, there are special lenders in the market who deal with these loans. They have gained a lot of popularity over the past few years due to various reasons.
Before understanding the pros and cons of payday loans, let’s understand the basic terminology linked with them.
- Principal amount – this is the amount you are borrowing from the lender. Usually, the principal amount is small and is around $500 to $2500. However, the amount may vary from lender to lender or state to state.
- Tenure – for how long is the amount borrowed and when is the due date. After the end of the tenure, the borrower must pay back the borrowed amount and all the finance charge linked with it.
- Finance Charges – this is a combination of the interest the lender will charge you on this loan and other fees or processing charges they may take.
Payday loans are becoming very popular these days and the main reason for this popularity is:
- Very less turnaround time: Payday loans are almost instant. Almost all the lenders will have a turnaround time of fewer than twenty-four hours. These days there are many online payday lenders that also guarantee same day payday loans. With emergency situations, this is a very strong selling point for them as traditional loans take a long time to process and approve and you may not want to wait that long.
- No Past Credit check: The other advantage of payday loans is that if you have bad credit history the lenders will usually not look into that. What the lenders are more concerned about is your current ability to pay back what you have borrowed.
Though advantageous there are some pitfalls or restrictions associated with them too:
- Very High interest: Payday lenders charge a high interest-rate and the APR on these loans can even go higher than 700%. This means that you may end up paying the lender a lot more than what you originally borrowed.
- State Regulations: Though most states in the United States have legalized payday loans, there are still few states that consider them illegal. Even the states where it is legal have many rules and regulations surrounding them, this is actually not a pitfall as this is done to protect citizens from the payday lenders. However due to these regulations you may or may not be able to get a loan of your choice.
There are many online lenders available that will give you instant and same day payday loan guarantee. You can research them online and chose the one that suits your needs. However, ensure that before going ahead with the loan application you check all the terms and conditions of the lender, their license and check that your state allows payday lending on those terms.