Based on credible research, it is suggested that a growing number of young parents (particularly those with small children) are making ends meet by turning to payday loans. But what really is it, and would you and your family really benefit from it?
Payday loans, or what others call a paycheck advance is a short-term loan to be paid on the borrowers upcoming wage. Some may also call them cash advances. In most cases, one would need to be employed, or have a basic source of income. For some lenders, these criteria may not be required.
Traditionally, borrowers would visit lending firms to apply for a loan with an agreed payment due on the next payday of the borrower. It is then the obligation of the borrower to pay the full amount inclusive of all the fees and charges. When due, it is then the responsibility of the borrower to visit the firm and pay for the said amount. In case the borrower fails to visit, the lender will be obligated to redeem the cheque. Should the account have insufficient funds, the borrower will be faced with bouncing cheque charges from the bank and just added charges. Another option would be to use increased interest rates to extend the loan and cover the default.
With today's modern advancements, a lot of interesting and convenient options for payday loan are made available. Getting a loan online - through the internet - is now a more viable option. This way, the borrowers can have the option to apply for the loan online. Once approved, the money can be transferred automatically - mostly within 24 to 48 hours upon approval. Payment will be withdrawn from your account automatically as well - in some cases. From a truthful perspective, these types of loans carry high risks for the lenders, thus making them carry higher interest rates compared with traditional loans basically because of this reason. Payday loans are not really the cheapest types of loan options that are provided, but they carry a very high approval rate, and the quickest solution for loaning money, thus making it a very viable option for people who are in need of quick cash or financially time-essential situations.
With its pretty hyped description there are still a number of critical areas that these types of loans have failed to address. Payday loans tend to offer higher interest rates than other types of loans making the whole repayment process a little tougher and a big challenge as well. Additionally, they seem to take advantage on the hardships people earning low income. In most cases, the borrower may not really be able to comprehend the implications because they lack enough information. This will be the very reason why most borrowers fall into the financial trap. And besides that, defaulting on the payments will result to legal threats for the borrowers.
When taking out a payday loan, it is really best to weigh both the pros and cons of such option - and do further research to come up with a wise and informed decision towards your financial situation.
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