Payday loans are small scale borrowing for short periods of time. This system has some very clear short term advantage, but also has its critics claiming these online lenders are little better than loan sharks.
The idea behind instant payday loans is that a person can borrow a small amount of money and pay it back, with interest, when they get paid. The loan can be applied for, approved and paid within a few hours with only confirmation of employment as a guarantee.
Application and Approval Payday loans can go from application to cash-in-hand in a few hours. All the companies require is confirmation that the applicant is employed in order to offer a guarantee the loan can be paid back. There is also no credit approval check, so even people with bad credit history can apply with a good chance of being accepted. Loan Structure The most attractive thing about a payday loan is it's structure. A small loan can be taken out to cover an unexpected bill or other payment with the safety of not having to pay it back until the regular pay check clear in an account. The monetary amount and the time scale of the loan are entirely up to the person requesting the money. This gives the borrower a lot of freedom to manage both the loan and their bank account. Interest Rates Contrary to popular belief the interest rate repayments on these loans are not excessive. In fact, little more than the average credit card. Interest rates will vary from lender to lender so it is best to shop around.
Legal Agreement All loan agreements are legally binding, so taking out a short-term payday loan can still lead to legal action and the risk of repossession. Several of these payday lenders are now registered with regulating bodies and so, they have the full force of law behind them. It is worth making sure that the lender is registered with a regulator to ensure the company will not scam the borrower. Late Payback The myth about the excessive interest rates comes from when the loan is not paid back on time. Once the repayment date has passed, the interest rate can go from around 10 percent to several thousand percent. Short-term It is very important to remember that these loans are short-term solutions. Therefore, they should not be viewed as an easy way out. An example of the problems arising from this includes people who take out a loan to pay off the first loan, leaving themselves in a perpetual circle of debt repayments.