Whether an unexpected bill reared its ugly head, or you're in need of some extra cash to help float till the next pay cycle, payday loans have helped many in dire financial times. While there are some very real disadvantages of payday loans, when used appropriately, these small-sized loans provide much needed relief and rescue. Before delving into the world of payday loans, take a few minutes to further your knowledge. As they say, "knowledge is power," and in terms of payday loans, this understanding could potentially save you hundreds, if not thousands, of dollars.
Elements of a Payday Loan
It's difficult to turn on the television or listen to the radio without being bombarded by payday loan advertisements. These small and short-term loans are designed to provide immediate relief; however, financial consultants along with the Federal Trade Commission, describe these loans as helpful for a select few, and harmful for many others.
Since payday loans are not delivered through a banking institution, but rather through a private business, its regulations and policies can dramatically vary. With that noted, the typical procedure of a payday loan is universal. The borrower writes a check from their personal account for the amount they wish to borrow, plus all associated fees. The check is typically post-dated to be cashed upon the next payday cycle. Upon this agreement, the lender provides the designated cash amount and is then re-paid upon your next payday.
Here's where the situation can get sticky, the fees associated with payday loans are at a certain APR, and are typically determined by the total borrowing amount. If you're unable to re-pay the loan by the initial payment date, then the repayment will be extended by an additional 14-days. While you're able to extend the due date, you'll encounter additional fees and high-interest rates.
While payday loans offer instant cash to help during financially tight moments, they're high interest rates and fee structure make it an unaffordable option for many. The biggest disadvantage these loans cause is further debt. If you're unable to repay the loan during the initial repayment schedule, it may be nearly impossible as payday loan APR's can soar to 391-percent over time, according to the Federal Trade Commission.
Even though payday loans offer genuine benefits, such as cash when you need it most, they're high interest rates and fee structures may not be your best bet. They are not useful when you are looking to buy a car or a home. For more information on auto loans visit this helpful site. Instead, consider small loans from credit unions or other private loan businesses.
Elements of a Payday Loan
It's difficult to turn on the television or listen to the radio without being bombarded by payday loan advertisements. These small and short-term loans are designed to provide immediate relief; however, financial consultants along with the Federal Trade Commission, describe these loans as helpful for a select few, and harmful for many others.
Since payday loans are not delivered through a banking institution, but rather through a private business, its regulations and policies can dramatically vary. With that noted, the typical procedure of a payday loan is universal. The borrower writes a check from their personal account for the amount they wish to borrow, plus all associated fees. The check is typically post-dated to be cashed upon the next payday cycle. Upon this agreement, the lender provides the designated cash amount and is then re-paid upon your next payday.
Here's where the situation can get sticky, the fees associated with payday loans are at a certain APR, and are typically determined by the total borrowing amount. If you're unable to re-pay the loan by the initial payment date, then the repayment will be extended by an additional 14-days. While you're able to extend the due date, you'll encounter additional fees and high-interest rates.
While payday loans offer instant cash to help during financially tight moments, they're high interest rates and fee structure make it an unaffordable option for many. The biggest disadvantage these loans cause is further debt. If you're unable to repay the loan during the initial repayment schedule, it may be nearly impossible as payday loan APR's can soar to 391-percent over time, according to the Federal Trade Commission.
Even though payday loans offer genuine benefits, such as cash when you need it most, they're high interest rates and fee structures may not be your best bet. They are not useful when you are looking to buy a car or a home. For more information on auto loans visit this helpful site. Instead, consider small loans from credit unions or other private loan businesses.