Payday Loan: Definition
A payday loan is a short-term loan that can help you cover your unforeseen expenses. A quick financial withdrawal is given based on your future paycheck. People prefer taking payday loans with higher interest rates rather than going to pawn shops. Payday loans also referred to as fast cash advance are readily available and do not require you to go through any lengthy applications.
When To Opt For Payday Loans?
Financially demanding situation:
It might happen that you are stuck in a financial emergency where you cannot wait until your payday. So what do you do? Given the technological advancement, you can simply log on to an online finance site that provides fast cash advances.
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By filling a form providing your name, address, employer and bank account details, you can have your loan approved in a matter of few minutes and your cash advance is deposited in your account within 24 hours. Alternatively, you can also visit a cash advance outlet in your vicinity and apply for loan in person. These loans are offered on an interest rate and are to be repaid by the borrower on his/her next pay day. One simply has to write a check for the borrowed amount that can be en-cashed by the lender on the day of your paycheck.
Bankruptcy
If you have recently declared bankruptcy, it can affect your credit rating and create problems with loan approval. You also cannot apply for a bank loan for the next seven years as the lender can find out that you have filed for bankruptcy. Well, here is where a cash loan can come to your rescue since there are no credit checks on payday loans! You only need to give guarantee that you will pay back your loan on time and that you have a job that allows you to do so.
The Big Question: To Keep or Not to Keep
Ever since the number of payday loan lenders and the popularity of such loans have sky rocketed, the public along with the government is debating on the pros and cons of cash advances.
To Keep
The working class in any country is the backbone of its economy. And most often than not, it is this working class that needs financial help from time to time. For emergency requirements, a payday loan is the greatest help a government can provide its people. These loans have become so important to many in the working class.
If payday loans are banned, it can put many people in a financial mess. There are people with bad credit history and also those who have filed for bankruptcy. For people in financial soup, short-term loans are the sole means of instant financial relief.
Moreover, ever since the government has made reforms and revisions in the direct payday loans practice, it has become difficult for the moneylenders to filch huge amounts from customers. There are laws as well that that protect the borrower from the vicious circle of long term debt.
Not To Keep
Despite the easy-to-borrow facets of the payday loan, it can land you in a big debt trap. There are some lenders who charge you a very high interest rate and even higher if you are unable to make payments on time.
Although the government has made reforms under which the borrowers are protected from debt traps, yet the lenders have found ways of working around these laws. For example, the Payday Loan Reform Act protects you only from direct interests and not from installment payday loan interests. A consumer gets no protection under the latter, which seems more attractive since you can pay off your borrowed amount in installments albeit at a greater interest rate.
Conclusion
The best way to decide whether to opt for these loans or not depends on the situation you are in. A likely choice to escape this dreaded potential trap would be to keep your expenses in control and save for a rainy day to meet all your unexpected costs.
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