It's three days before payday, rent is due, the pantry is empty, and they're gonna cut the power. What can you do?
Few things are as stressful as financial hardship, and some businesses are astutely aware of this. Thankfully, these businesses offer a specific service, known as a payday loan, to help people pay their bills, feed their children, and keep a roof over their heads.
So what is a payday loan?
Like many loans, a payday loan is an exchange where you are given a large lump sum of money today, and there is an agreement that you will pay that money back, with interest, at some point in the future. Specifically, payday loans are meant to help people cover their expenses that pop up before payday. This ultimately means that payday loans are extremely short term, and should thus be paid back as soon as you get your paycheck, which should be within a few days.
What separates them from traditional loans?
Firstly, payday loans have higher interest than traditional loans. This means that if you let a payday loan go unpaid for a long period of time, the interest will rapidly accumulate and become financially unbearable. However, payday loans are generally smaller sums of money than traditional loans, so a high interest rate doesn't necessarily translate to a huge amount of debt.
Secondly, payday loans do not have the same credit requirements that many larger loans have. If you need a payday loan, then chances are that your credit isn't good enough to get traditional loans at a bank. While a bank or other large lending institutions may turn you down for a loan, you are likely the target audience of businesses that provide payday loans.
So should you get a payday loan?
If you have a strong plan for paying the loan back, then there is nothing wrong with getting a payday loan. In many cases, you simply can't afford to be without food, water, electricity, a residence, a car, or any number of other essentials. However, if you do not have a solid plan for repaying the loan, the interest might put you even deeper into debt, putting you in a cycle of financial crisis followed by financial crisis.
Ultimately, you will need to weigh your immediate need for money against the burden of interest. Be responsible and don't take a large payday loan to pay for a new stereo.
To learn more about payday loans, contact a company like Payday Express.Share