The need for urgent money can get in the way of anyone. Specially in today's high cost of living, there are many things related to rental, fuel, bill payment, and other miscellaneous sectors that demand immediate cash. But by the month's end, many of us are left with little to no money and seek a short term loan to meet the needs.
Payday loan is a kind of short term loan that provides instant cash when you have no money, and your salary/income is still due. The loan process is simple- you go to the bank, write a check, and the bank would hold it till your next payday. You then ought to make the full payment to the loan lender on your next payday. Payday loan lenders set different usury limits on the principal loan amount, typically in the range of 15 to 30 percent. However, some countries have set maximum usury limits and lenders can not charge more than that.
How is it helpful?
This short term loan comes with its share of benefits. The financial emergency can hammer its identity when we are low on cash. This leaves us with the option of either borrowing money from friends or relatives, or get a payday loan from a loan lender. While friends and family are always the best bet to get you across the financial trouble, asking them money for a car repair, paying medical bills, or buying a dress for a party may sometimes get embarrassing. Payday loan companies however lend you money on the understanding that the applicant's need for money is just short-term and he would repay the money as and when he gets his pay. You can get the money for as less as 2 or 3 days and maximum for 30 days.
Disadvantages of Payday Loans
While payday loans fill your pocket with instant cash, many people see it as a blessing in disguise. They suggest using credit cards or debit over-draft instead. The interest/ commission on the payday loan, along with the principal payable amount make the borrower's next salary a meager and he has to renew the loan. It becomes the vicious circle of loan on loan, and the interest amount gets more than the principal amount.
Borrowing a payday loan means that you are almost finished with cash during the last days of the month. This also reflects bad money management. It means that you did not save enough money for unprecedented events. Howsoever good or bad the payday loans are, they should be considered as the last option while asking for money. Plan your money in a way that you can manage without borrowing. And if at all you borrow, you are able to repay the full amount on time.
