Payday loans are loans that are very easy to get as long as the lender is able to see your pay stub to verify employment and get a post-dated check from you or a post-dated authorization for draft from your bank, to repay the loan. This may be dated a couple of weeks to a month after availing the loan.
Payday loans are great when you are facing sudden, urgent financial crunches, but only on a temporary basis. These kinds of loans are not advisable for inexperienced borrowers who have little control over their cash flows.
The main disadvantage of payday loans is that there are many chances of letting the loan get out of control. They may seem affordable at a certain point in time, but may become a larger amount in just a few months. Therefore, I suggest you take certain factors into consideration before applying for a fast cash payday loan.
1. The amount that borrowers receive is much lower than the amount that is written on the check. Finance charges are deducted from the amount of the loan, as per the terms and conditions of the contract. You are required to write a check or approve a draft to your bank account of the loan amount, plus the finance charges, and failure to do so will require a higher rate of finance charges.
2. You may have more funds in your account to cover the amount of the check. In case the amount of the loan becomes due and you are not in a position to repay it, you are provided other options from your lender.
It may be suggested that you renew your loan amount, or make consideration of a new loan. This new loan will have separate finance charges as well as late fees, all adding up to a new amount.
3. Different kinds of State Regulations cover the payday loans, which have a term limit of 30 days. The lenders use their own discretion and issue loans that are usually not less than 30 days, placing us at the mercy of the lender.
4. When you are experiencing cash crunches, this kind of loan is very suitable. The contracts clearly state that you are expected to pay the loan back as soon as you are in a better financial position.
A trend has taken over most borrowers though, requiring them to "roll-over" their loan, and this results in a larger loan amount due to more finance charges. Therefore, this adds pressure to you to repay a bigger loan.
5. These loans are available to people who are in lower income brackets, who are not usually able to get money anywhere else. The fact is to be taken into account that the lender does not consider the financial position of the borrower in such circumstances. It is the borrower's responsibility to analyze their own financial situation and determine if a payday loan is in their best interest.
6. There are many online lenders that make a habit out of automatically rolling over their loans. Other states have contractual agreements with the borrowers that state that they borrower has no right to file for bankruptcy or a file any kind of suite against the lender. Tread carefully.
7. Payday loans are considered to be your last loan option to take when you have no other source from which to borrow. These loans are easily available, with no hassles relating to approval, and are therefore very tempting to borrowers.
Whenever you want to take out a loan, you should be well informed about the risks involved in the loan, about the differing rates of the loan, and also about the fees that will be covered. You have the option of seeking help from different financial organizations, who may provide you with excellent options for negotiations, thereby making a reduction in the interest charges and lowering the monthly interests in the process.
Payday loans are attractive solutions to quick financial issues, but not for long term financial crises. You can find yourself in a vicious cycle of debt, so it is always good to ensure you know exactly how you are going to pay the loan back when it is due.