Need immediate cash for dream travels, urgent pay-offs, tuition fees, home furnishings or remodeling and many other urgent cash needs before payday? Of course, urgent needs require urgent remedies right? But before plunging in into the enticing offers of applying for a payday loan, consider these truths first.
How It Works
Payday loans, also known as ‘cash advances’, are short term unsecured loans basically intended to be paid until payday or the date agreed upon usually not exceeding 30 days plus interest. This is done by, the borrower, issuing a post-dated check and cashes it out on the declared date. In addition, the borrower would also give an additional fee in exchange for cash. If the account runs short on funds to cover the check, the borrower usually faces a bounced check fee from their bank in addition to the costs of the loan. The loan gains additional fees and an increased interest rate as a consequence of the failure to pay.
Basically, all that is needed to apply for a Payday loan is an open bank account, a steady source of income, and identification. However, Payday loans can be very expensive and can cost you a lot. Since Payday loans are short term loans, even with seemingly fair interest rates, but due to the short span of given credit time it is actually much higher than a credit card charge for the same amount of debt.
Stressing the impact of stagnating wages, insecure work and rising prices nowadays, without enough financial knowledge, even employed people are enticed to apply for a loan just to make their cash last to the end of the month. Low-income families who were struggling to make ends meet added to the trend to rely on credit to buy essential items. However, if their pay is not enough to meet their everyday needs, how much more will they be able to pay for their cash advance? Consequently, many are failing to make ends meet and are falling into further debt. This will entrap them to the vicious cycle of poverty and debt.