Should You Sign Up for a Payday Loan?
Published on May 22nd, 2015 | by Joan Makai
The 15th of the month has yet to arrive and you need to pay for something really badly. You don’t need a huge amount – just enough for whatever it is you need to spend on. Then everyone tells you to get a payday loan.
Let’s Define This for Those Who Aren’t Familiar With It
Don’t worry; we’re not judging you for not knowing this too well. With so many kinds of loans being offered by banks and other financial agencies, terms can get really confusing.
Payday loan (also known as cash advance loans or check advance loans) is a small amount of money lent to those who need it at a very high interest rate. This is also a type of short term borrowing so if you borrowed money now, it will have to be ‘returned’ to the lender when your next paycheck comes – hence the term.
How Does It Work?
The process of borrowing and paying this short-term loan depends on the company you chose and the amount you are thinking of getting. But it starts like this:
You open an account online. The lending group will check your credentials (work payment slips or stubs usually work) and see if you can pay. They offer you their minimum amount which is usually $100. That amount could increase, of course, but it is contingent on your frequency of loaning and ability to pay. They also tell you when you can pay and the fixed interest rate to be added. When it’s time, you pay them back.
The Pros and Cons of Payday Loans
This is advantageous for people who just need a certain amount for something and the actual pay date has not come yet. It is a quick fix. And who doesn’t like a quick fix?
The downside is the high interest rate. The terms would differ from one company to another and would depend on how much the borrower would need. But let us give you an example:
One well-known company offers $100 minimum loan which should be paid off in two weeks. They offer a $30 charge which is equivalent to 30% in interest. If that sits well for you, go with it.
The problem will arise if you’re late in payments. They have an even bigger fee for that which will accrue when you still aren’t able to complete the payment.
Is It Worth It?
If you’re really just waiting for your paycheck and the high interest rate doesn’t bother you, go for it. But if you’re not sure or think that the interest is too absurd to a small amount of loan then figure out other ways to get that money you need and steer clear of payday loans. You’re your friends or family and ask for a little help. Sometimes borrowing from the people you know can help your immediate money problems rather than biting the kinds of interest you can’t chew, and this actually saves you from falling neck-deep in debts.