Also known as a paycheck advance or cash advance, a payday loan is a short-term financial arrangement intended to cover a shortfall in expenses between pay checks.
The use of this kind of emergency credit is highly controversial, but if you understand exactly what you are doing, a payday loan can be a viable source of emergency funding.
Are the Payday Loan Horror Stories True?
As is often the case, a few bad apples spoil the barrel. Unscrupulous companies have and are guilty of charging astronomical interest, accessing clients’ bank accounts, and attaching exorbitant fees. If a payday loan is an absolute necessity, and for many low-income households it is, the important thing is to find a reputable, trustworthy company; to understand all the terms of the loan agreement in advance; and to settle the debt quickly and on schedule
Are Payday Loans Regulated by Law?
Regulations that mandate how payday loans may be executed vary widely by state, but where limitations do exist they are principally intended to limit the levying of excessive, unreasonable rates of interest (known in legal terms as “usury.”) And this is how people get in trouble. With annual percentage rates that can fall between 200% and more than 500%, not paying the amount in a timely fashion can be a disaster. For instance, if you take out a $300 loan and take two years to pay it back the amount, with interest will more than triple.
Consequently, payday loans are currently regulated in 37 states, with 13 either banning their use or limiting the terms so severely companies choose not to widely attempt the arrangement. Also, there is a federal law that has been on the books since October 1, 2007 that caps the lending to members of the military at an APR of 36 percent.
Are These Companies Just Crooked?
There’s no industry where there aren’t unscrupulous companies, but it is important to remember that the risk profile in the payday loan field is extremely high. The high interest rates on these short-term loans exist to protect the lender. If the loan is resolved on time, there is no usury, and the default rate on payday loans is 10-20% and higher in given locales. These companies are in business, and they do have to protect themselves.
What are the Advantages of Payday Loans?
Payday loans are particularly appealing because they are simple to get and rarely involve a credit check. Normally the loans are afforded and funded within 24 hours with no collateral and little paperwork. Sources are available locally and online, and can deliver fast cash in the face of an immediate and unforeseen need.
What are the Disadvantages of Payday Loans?
High interest rates are the major downside of payday loans. If the amount is not paid quickly and in full, the amount can grow rapidly and greatly complicate the holder’s overall debt picture. Additionally, some companies are not reputable and use heavy-handed and even illegal means to collect the amount owed.
Get a Cash Advance or a Unsecured Personal Loan
If you need a online cash advance in a hurry, for a financial emergency. Use our payday loans or cash advance service to cover bills, send fast cash to loved ones, or to just have a stress free weekend.
Many times you can receive cash within 24 hours or process no fax payday loans with no teletrack, a competitive personal loan based on current APR. Secure Loan Consolidation gives you the tools and resources to learn about payday loans. We also, provide up-to-date news on the latest cash advance happenings to keep you informed.
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