It seems that everywhere you look there are signs that offer immediate payday loans. These are loans that are very easy and fast to get. However, while they provide a valuable service in the community, they are quite expensive. Borrowers who choose to use them should do so with caution. These loans are usually set with a fixed dollar fee that represents the finance charges for the loan, which can be quite high. Nevertheless, when used in the right way, these loans are great for getting out of a financial pinch from time to time. The risk is that the borrower might be unable to pay the loan back within the specified time frame.
How Do They Work?
Payday loans are usually guaranteed with a pre-dated check or a debit authorization. You simply write the check for the amount of the loan plus the finance fee payable to the loan company. If when the due date comes you are unable to pay the loan, you can write a second check for the next pay period to cover the amount plus any additional finance fees. This is where the risk can come in. For each pay period where you are unable to pay back the loan the loan, finance charges continue to increase, costing you even more money. This can trap the borrower into a vicious cycle, which can be very difficult to get out of.
Why Use These Loans?
These accounts are usually available for anyone who has a checking account and a regular income. However, the majority of those who borrow on these terms are those who don't have access to easier and more affordable funding like credit cards or savings accounts. Also, those who may have a bad credit history are more inclined to take out one of these loans as other sources are often unavailable to them.
Immediate payday loans have quite a few benefits for those who do not have alternative financial options. They are fast and convenient and you can borrow smaller amounts of money than the traditional financial institution will often allow. They are also fast – you can have cash in hand in a matter of minutes as opposed to a traditional financial institution, which could take days or weeks for approval. Lenders don't ask questions about the purpose of the loan either. All they are concerned with is your ability to repay the loan on the due date.
Caution Is Warranted:
As warned above, there are negatives that you need to be concerned with. While the loans are very easy to get, always make sure that you have a means of paying it back in a timely manner. If you find that you are unable to repay, you will be charged with additional fees that could amount to quite a bit. In some cases, payday loans have an annual percentage rate that is as much as 400% of the loan amount. When it comes to immediate payday loans, always consider more affordable options first and only use them when you have no other choice. When you do, make sure that you're in a position to pay it off as soon as is reasonably possible so that you can have peace of mind and avoid the pitfalls that often come with such loans.