Managing money is not easy for everyone especially if there seems to be more going out than coming in. Living on a budget is good, and all goes well until an emergency of some kind happens. There are many instances when extra money is needed, and the only option for many people is to borrow from a financial institution. Installment loans are what most people try to get, but sometimes, their credit rating will not allow for these transactions. A Payday loan seems to be the other viable option for people with less than good credit.
What are Payday Loans
A same day payday loan is when money is borrowed, and paid back in full on the next pay day. This type of loan caters to people with good, bad, or no credit. The loan amount is based on how much the borrower can repay at one time. The desperate need for immediate money forces many people to take advantage of this type loan without considering the long term consequences. A Payday loan usually has a higher interest rate than a convention installment loan, and the pay back often is three times the original loan which is a fact that most borrowers do not think about.
Are Payday Loans the best alternative?
When contemplating a payday loan in an emergency situation, it seems to be a good idea at the time. If living on a budget, it may be difficult to repay the balloon payment on the next payday without neglecting other obligations. This causes another situation to arise. It could set you back with other bill payments, and household expenses. For this reason, many people have defaulted on a payday loan allowing another situation to come to the forefront. The annoying phone calls will seem illegal, but they are within their right to try to collect a debt. If you are struggling to make ends meet, a payday loan may not be the solution to the problem.
The disadvantages of a payday loan
A Payday loan is simply more expensive than a regular installment or personal loan. The interest rate on these loans can run from 300% to 900% which means you literally pay off the loan three to four times the face value. This is mainly because it is a short term loan. Most loan companies have an interest rate of 12% or slightly higher. If this is compared before taking a payday loan, the industry may not be as lucrative.
A payday loan can be determined as the loan for people who really do not need the money. For those with a real need, it can put them in dire straits when it is time to repay. These loans are easier to obtain than most traditional loans. The application process is short, and they can be done online for faster processing. An online payday loan will deposit money into a bank account on the next business day. This is one reason for the popularity of a payday loan account.