Payday loans are small scale, short-term borrowings taken out to cover unforeseen expenses and are usually paid back at the end of the month when the person’s regular income is paid. There are numerous payday lenders offering online lending with the majority offering instant acceptance and guaranteeing the money will be available within a matter of hours. Before anybody considers requesting a loan like this there are a very benefits and drawback to be weighed up.
The Application As no credit history check is required for these loans acceptance is almost guaranteed so long as proof of employment can be produced. This is required to ensure the lender the loan can actually be repaid. Speed This instant approval allows the lender to operate a much faster acceptance process than a bank or other lender, with the money being paid almost instantaneously into the borrower’s bank account. This means these same day loans are a useful system for people needing to pay off unexpected bills or cover unforeseen cash shortfalls, while still having the guarantee of an end of month pay check. The Structure Payday loan amounts and repayment periods are chosen entirely by the person borrowing the money. This means the borrower has a much greater ability to manage the loan ensuring the loan amount is not excessive compared to other monies coming into the account. Interest Rates As with all loans an interest rate has to be paid on top of the loan itself. The rates are comparable to credit cards, but each lender will set its own rates. This means it is important to shop around online lenders to find the one with the best deal.
Legal Action Despite the lack of checks these lenders are normally registered to a regulator and the loan carries the same legal effect as any other loan. This means failure to repay can lead to legal action and the possibility of repossession. Late Payback If the loan is not repaid on time the interest rates go from standard to astronomical. Outstanding amounts on payday loans after the repayment period has past can be several thousand percent. Short Term These loans should only ever be used as a short term solution and should never be viewed as a way of getting out of long term financial trouble.