What Is The Reality About Payday Loans?
Payday loans are short-term advances that are given by private lenders while charging high-interest rates. The money lent is generally in the region of $500 or less, and the borrower is required to return the payday loans when he or she receives their paycheck. Payday loans offer quick cash infusions when you require money to meet an emergency. However, in many instances, consumers receive more than they had bargained for.
According to the Consumer Financial Protection Bureau, lenders issue payday loans in small amounts, but they receive access to the borrower’s checking account in return or require the borrower to issue a postdated check for the money borrowed. The lender deposits the check when the due date of the loan approaches. Payday loans usually come at exorbitant rates of interest, which can be as high as 400%. Before entering into a payday loan agreement, you should exercise caution and read the fine print before signing the loan agreement.
“Payday loans are but one of many financial techniques – from overdraft fees to student loans subsidizing for-profit colleges – specifically designed to pull money from the pockets of the poor. This problem generally goes unrecognized by policy makers.”
What Are Payday Loans?
Payday Loans have several names. They are also referred to as cash advance loans, check advance loans, deferred deposit loans, and post-dated check loans. They also come from various sources. You can walk into the store of the lender or even make an application online by providing information such as your age, your residential address, your Social Security number and the number of your bank account. You can request the amount you need and agree to pay the fee for the loan, and the amount is usually transferred to your bank account within a short time.
Any person who is capable of returning the money on the given date can borrow payday loans. Failure to repay can bring difficulties on the borrower in the form of penalties and exorbitant additional financial charges. Payday loan lenders do not conduct any credit checks on borrowers and are willing to offer the money as long as they have the information they have requested for. However, they can also be tough when one defaults.
Why Are Payday Loans Expensive?
As mentioned earlier, payday loans come at exorbitant interest rates that can range from $15 for every $100. The cost of the borrowing is high because of the short term for which the money is lent. Borrowers usually seek the loans when they are in need of short-term cash to repay once they receive their paycheck. However, many people have become habitual offenders of payday loans and are borrow payday loans frequently. Today, nearly 12 million Americans get payday loans every year simply because anyone with a checking account and a steady income can borrow a payday loan. These loans are highly popular among people who do not have access to credit cards or savings accounts.
“The Pentagon got fed up with its recruits getting ripped off by payday lenders and in 2007 got Congress to make it illegal to extend such loans to members of the military. But civilians remain fair game.”
Should You Consider Applying for Payday Loans?
Payday loans are definitely helpful if you are dealing with a medical emergency and need to raise finances in a hurry. However, they are not beneficial if you need cash for unnecessary expenses. If you have to get cash to repair your car, only use a payday loan if the vehicle is indispensable to your needs. Otherwise, you should depend on public transport until you receive your paycheck and then repair it.
To determine whether you have to apply for a payday loan, consider all the other available options and use payday loans only as a last resort. You wouldn’t want to get into trouble by borrowing money at high interest rates. Therefore, keep off from such loans.
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