Whatever our savings, sometimes life proves that they are still not enough. With each of us, of course, there were situations when money was needed urgently, but there was nowhere to take it.
Usually, it is in such cases that people resort to a payday loan. It's simple and fast, so it seems like a good solution.
But after such a decision, many people fall into debt pits, take one loan to pay off another, and, as a result, what should have been paid within 14 days stretches for months.
But this can be easily avoided by knowing what a payday loan is.
A payday loan is a type of loan product that provides quick access to a limited amount. For example, payday loans often offer $1,000, rarely when you can borrow up to $1,5000.
The terms of such loans are compressed - 14 days or a month.
The main advantage of payday loans is their speed and availability to people regardless of their credit history. The main disadvantage of such loans is interest rates, which start at 36% and, depending on the state and the lender can reach 400%.
Traditional and private lenders typically require a large amount of paperwork when obtaining conventional loans, such as personal loans. Moreover, they need time to approve the loan application. So from submitting a loan application to getting access to the money, it can take from three to five days.
When you take out a payday loan, processing takes a few minutes, and you can get access to the money on the day you apply or the next business day at the latest.
At the same time, payday lenders, of course, take into account your credit score but do not focus only on it. Typically, these lenders will verify income: and ask for a payment history, the source of income, and other documents. Thus, they make it possible for people with bad credit to get a payday loan.
When you decide to get a payday loan, the first thing you do is fill out an application for a loan. This can be done online or in a store. After you send an application, it will be processed in a couple of minutes, and you will receive a decision: is a payday loan available for you or not? If approved, you will need to sign a loan agreement and wait for the funds to be credited to your specified account.
After you have access to the funds, the countdown of the loan term will begin. Due to the fact that the payday loan is short-term, you do not need to make any monthly payments. However, at the end of the loan term, you will be required to pay back the entire amount borrowed, plus interest and fees that lenders may charge.
Often, in order for the payment of the loan to go through automatically, payday lenders access your account and withdraw the necessary amount on the due date. In this case, you do not need to do anything other than make sure that there is such an amount in the account.
With payday loans, you need to be careful. Before taking it, you must make sure you can definitely repay such a loan on time. There should be no "possible" and "probably" - only a firm belief.
If you are confident in your decision and that you will be able to repay the loan on time, then take some time to choose the most profitable option available.
Due to their short terms and high-interest rates, payday loans can be dangerous. Therefore, before you take such a loan, consider other options.
For example, you can borrow money from friends or family members. Many do not want to interfere with their financial affairs in private relationships, but in an emergency, an exception can be made.
If you don't want to or can't borrow from loved ones, consider taking out a personal loan. Yes, it's still a loan commitment. But at the same time, personal loans usually have lower interest rates, plus even the smallest amount that is available under such loans can be broken down into several payments so that loan repayment does not become a heavy burden on your budget.
Among other things, try to take care of unexpected expenses in advance. You can save money for this in a separate envelope or put it in a savings account, which would be much more profitable. So, if necessary, you will already have the same $ 500 that you can get, thanks to a payday loan.
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