In today's economy the threat of going into debt is ever increasing, yet still as unappealing as ever. In a time where the stability of banks is coming into question, it isn't a comforting thought to think about borrowing money. But what if you are in need of a quick financial fix? Are payday loans a safe way to go even in a down economy?
Let's take a look at some aspects of a payday loan and what they mean for potential borrowers. First of all, what is the premise of a payday loan? Payday loans are short term loans for small amounts that are intended to cover financial needs until an individual receives his or her next paycheck. Payday loans can be used for any purpose, but are usually reserved for extenuating circumstances when there are no other options to cover a financial burden.
Sometimes those two weeks just don't go fast enough and unexpected expenses occur. Such issues can include anything from health issues to automobile repairs to rent being due. During such times a payday loan can be obtained in order to relieve a financial burden at a relatively small cost of interest. Payday loans tend to have a higher rate of APR than a full term loan would carry, but this number is often misunderstood.
Because the loan will only last over usually a two week period, this annual percentage rate becomes crunched into a smaller time period, resulting in a higher number of APR. The actual interest cost to be paid usually comes out to around a dollar a day per $100.
When compared to the interest cost of a regular, full term loan, this number is very reasonable. The small, temporary nature of payday loans differentiates them from regular loans.
Payday loans were not intended to be long term, stressful procedures. Rather, they are available for those who, while receiving a regular income, find themselves in need of a quick, convenient solution at a reasonable price.
If people are in need of long term financial aid, payday loans should not be the way they seek it. Individuals should be aware of the details of any type of loan before attempting to acquire one.
Another way payday loans differ from long term loans is that lenders are not necessarily connected to banks. Because of this, the stability of a certain bank will not affect an individual's ability to trust its lender.
Lenders take measures to make sure their practices are legitimate and trustworthy. According to the Truth in Lending Act, all banks and lenders are required to clearly display the APR at which a loan will be obtained.
Legally operating lenders will always be up front with the consumer about the interest cost before any funds are distributed. Lenders also make sure they are lending to those who will be able to pay back their money, plus interest.
Potential borrowers are required to bring recent pay stubs and a current bank statement to show they are receiving a steady income and will be able to pay back the loan. So are payday loans a valid solution in an unstable economy?
It depends on your situation. If you are an employed, responsible individual in need of short term financial aid, payday loans are a great way to go.
If you are seeking a more long term, larger type of loan, you will want to look elsewhere. At the same time, if you are looking for a short term loan but know you will not be able to pay back the interest, it is best advised to stay out of debt.
If borrowing money becomes necessary, personal financial responsibility is encouraged. If you feel a payday loan is a good way for you to go, you may obtain it two ways: Online or in person.
Each method has its pros and cons but both require approval before any money is received. The approval process is simple and easy and does not depend upon credit scores.
Rather, a lender simply needs to know you will be able to repay the loan once it is incurred. With different lenders, approval processes may differ. If you are considering a payday loan, don't hesitate to contact a lender near you and find out what you need to do in order to obtain one.
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