If you’re reading this article you’re probably in a situation where you need a little bit of money fast to cover you until you get your next paycheck. Maybe it’s medical bills, maybe your car broke down or some appliance in your home or maybe you don’t have enough to pay the rent this month.
This type of thing can happen to anyone and that’s exactly why payday loans have become so popular. But first we need to clarify what they are.
What Are Payday Loans?
As the name implies, getting a pay day loan means borrowing a small amount of money short-term – until payday. You can get them from a physical location or online. We recommend you first look online since this way you can compare options and google everything you don’t understand. You’ll need an ID, bank account and proof of income. How much you can borrow will depend on your salary.
Even if you have poor credit, you can look for payday loans no credit check and you’ll most likely find a lenders where you can apply but they might have higher interest rates.
How Does It Work?
After you find a lender and apply, they confirm your income and bank account information and send you the money. Usually quite quickly, in less than a day. They’ll ask you for written permission to withdraw the money from your account on the specified date, your next payday – 2 weeks to 1 month.
Some lenders also offer the options of paying in installments, and they’ll withdraw money over two, three months according to your agreement. When you discuss the conditions of your loan be sure to ask what is their course of action in case you miss a payment and how much will they charge you extra (interest and fees).
If you do miss you pay-back date, they’ll contact you and you can negotiate, but you should know that it will cost extra. So, calculate your budget so that you can make the payment you agreed upon.
Pros and Cons
Payday loans are fast and easy to access. You can get a personal loan from your bank but this is a longer process so it doesn’t work if you need money right now.
Another advantage is that you can get this type of loan even with poor credit. A traditional loan from a bank will usually require you to have excellent credit history.
Now for the downsides. Payday loans have higher APRs which means annual percentage rate of interest. Another problem is that you can only borrow a small amount of money, depending on how much you earn.
What you need to watch out for the most is falling pray to lenders that purposely mislead their clients and basically throw them into a vicious cycle in which they can’t repay their debt and the lender keeps making money from penalty fees. Read the fine print don’t be afraid to ask very specific questions before you choose a lender.
Disclaimer: This content does not necessarily represent the views of IWB.