A payday loan is generally a short, temporary unsecured loan usually with high interest rates, with a very short repayment period. It is usually used as a last resort when all other options have been exhausted. But the benefits are numerous for such borrowers because it can provide them with instant money to tide them over in case of any emergency.
Such loans can be availed online and it is even possible to do so without a bank account. The lender will require some information from you including your name, address and employment details. These details will enable the lender to know the amount of debt you have and how much you can afford to repay on a monthly basis.
Your lender will then calculate a loan amount based on these figures. He will either approve or reject your application. You can also approach a number of lenders at once for a larger loan.
If you cannot pay back the loan amount, you will not lose anything. You will only have to pay the interest on the interest.
Payday loans have their share of critics who say that such loans are a source of financial exploitation. They claim that this type of loan can lead to more problems if you have a poor credit rating. Even if you have a perfect credit score, lenders may demand for collateral to ensure repayment.
There are even some critics who claim that payday loans are also a source of fraud, since borrowers often go ahead and commit such infractions in order to increase their loan amounts. These borrowers then file for bankruptcy after they do not pay back the loan.
Nevertheless, payday loans are an option for all and can be very helpful in times of need. Just make sure that you only apply for such loans for the ones you really need and for urgent financial needs. This will help avoid getting yourself into a situation where you will have to declare yourself bankrupt just because you had a sudden emergency.
In fact, such loans can be a lifesaver when you need money at the most inopportune time. But remember that the borrower is responsible for repaying the loan.
When applying for such loans, you must remember to put a reasonable repayment plan. If you are not able to afford to repay the whole amount by the due date, you will have to take the maximum loan amount until you are able to meet the payments. So make a budget and stick to it.
You may also go in for debt consolidation loans, which are often more convenient and less expensive than payday loans. Since these are short-term loans, they will provide better repayment options, especially if you have multiple loans with high interest rates.
Debt consolidation loans are generally unsecured. Therefore, you must take care not to fall into the trap of falling into the temptation of taking out a large loan to consolidate your debts as you will have to pay a higher rate of interest.
However, there are instances when you will need to use collateral to secure such loans. For instance, if you have an adjustable-rate home mortgage, your lender will usually accept a home equity loan.
If you have bad credit, these loans may not be an option but you may still be able to get loaned loans online through banks or financial institutions that specialize in such matters. You may find it necessary to go through a broker or a personal banker to get such a loan.
It is important for you to understand the way payday loans are processed and to know their various terms. Although these loans are fast and convenient and can offer instant cash, you must be wary of the risks and pitfalls of such loans.
When applying for these loans, you will need your personal information such as your name, social security number, address and employment verification. You will also need to provide details of your employer.
You should read carefully the terms and conditions of the loan, including the fee that you will have to pay for the loan and whether any penalties apply to late payments or defaulting on the loan. You will also have to pay a service fee that covers the cost of the lender's administration costs if you fail to repay the loan within the specified time frame.