Is Payday loan the right solution for you?

We are often overwhelmed by some unforeseen financial emergency in life and don’t know who to turn for help.   Borrowing from family and friends can indeed be a humiliating thing. At that point of time Payday loan can become a blessing for you.

Note: The Payday loans are something like Personal Loans, available in India. This article is for our readers in UK, Australia, USA and Canada.

What is a Payday loan?

A Payday loan is small, short term and unsecured loan. It is designed to cover your expenses till your next payday. They are provided by cash advance stores with one time fees attached. The borrower usually writes a check for the amount borrowed plus the fee. So it is a loan drawn against a future paycheck to meet urgent needs. Loan amounts can range from a few hundred dollars to $ 1000. The interest charged is usually 15-20% of the amount borrowed.

Payday loans are getting increasingly popular these days. Why?

• Payday loans provide an instant solution to an unexpected financial emergency. They can provide easy and fast access to cash. In case you have an emergency (like a health related problem), Payday loan can act as a quick fix.
• Payday loan involves a hassle free process. It takes only a couple of hours to complete the formalities. You just need some basic documents like identity proof, bank statements etc.
• Within a day the money will be deposited to your bank account.   So you will get the cash within 24 hours. If you need the money quite badly then this aspect of payday loans will appeal greatly to you.
• A good thing about Payday loan is that your financial information remains private. It is for consumers who want anonymity during emergency situations. In case of traditional long term loans things are just the opposite.
• Credit checks are usually not required here. This makes it easy for people with no credit or credit problems to apply for Payday loans.
• It is not hard to qualify for Payday loan. All you need is a steady monthly income and a valid bank account. Even an individual with bad credit rating or a history of bankruptcy can be eligible for Payday loan. Generally people who don’t have access to credit cards and savings account use this kind of loan. Military personnel and immigrants also use them often.
• A Payday loan, as mentioned before, is an unsecured loan. That means even if you fail to repay your loans you won’t have to lose your assets.

Also Read: 7 warning signs that you have got too much debt

A few things to remember while opting for a Payday loan

• Excessive dependence on Payday loans can be a source of trouble. You must remember that Payday loans are an answer to the emergency situations that pop up out of nowhere. If you start relying on them just because you can’t resist the temptation to buy unnecessary stuffs then a lifetime of indebtedness would follow.
• Payday loans have extremely high interest rates. The lenders virtually take advantage of the fact that you desperately need cash. So before going for it make sure that you can afford it.
• Payday loans are usually small loans. So if you need some big bucks then better look elsewhere.

Also Read: What is the right strategy to Combat Debt?

Payday loan stores are all over the place these days. If you still have trouble to locate them then internet can help you. Now that you are familiar with the concept decide for yourself whether it is the best solution for you. Take your decision carefully.

This post is submitted by our Guest Blogger, David Brown. David is the founder of fileyourbankruptcy.org, where he writes articles on Personal Finance.