We are all faced with uncertainties, especially with regards to financial stability. Unexpected needs will just surprise you out of nowhere without being prepared for it. That is why many financial institutions are offering a solution. One of these solutions is applying for a payday loan. This is done by, the borrower, issuing a post-dated check and cash it out on the next payday or the date agreed upon usually not exceeding 30 days. In addition, the borrower would also give an additional fee in exchange for cash.
The thought of instant access to quick cash sounds very appealing especially when you’re faced with unexpected bills that you urgently need to pay off and have no emergency savings in stored. With payday loan, borrowers can access to fast transaction loans without the hassle of long procedures such as securing papers for collateral. Basically, it only takes a range of few hours to few days to get the loan approved. If an emergency situation arises and acquiring fast cash is a must, this solution is for you.
However, payday loans have higher interest rates since it is an unsecured loan which does not require any collateral from the borrower. Typically, borrowers who go for payday loans are those who have the urgent need for fast cash, not minding the interest rate of the loan due to emergencies. This in turn will make their problems double since most payday loans have higher interests compared to other loans with collateral. And even if the interest rate of payday loans sounds reasonable, may range from 15% to 30% interest rate, but due to the short span of given credit time it is actually much higher than a credit card charge for the same amount. When payday comes, and you failed to pay off the original loan plus the fee, you can roll-over the loan for another fee. This can inflate expenses for the consumer. According to the Consumer Finance Protection Bureau, half of all borrowers end up paying more in fees than they originally borrowed.