Payday loans are quickly becoming one of the most popular products across the world. However, as the amount of borrowing is highlighting the spiral of debt that people are falling into, will a payday loan really help? In the current economic climate, banks are getting increasingly tighter on lending and as the global growth outlook continues to look bleak, bank lending looks set to shrink further. With this said for people who need access to cash but are constantly getting turned away from their banks, or people who need money fast for an emergency, what are their options? Consumers are increasingly seeking alternative sources of finance, such as payday loans.
A payday loan is an unsecured short term loan with the general idea being you borrow a small amount of money that you pay back, plus interest when you next pay cheque comes through or on your next ‘payday’ hence the name. They are quickly becoming one of the most popular products on the market because you can get access to fast cash when you need it, often on the same day. Some lenders can even get the money to you in under an hour. There are also minimal credit checks involved and you are likely to get approved for a loan whatever your credit rating. For many, payday loans are seen as a simple solution to a debt crisis. But, how far is this the case?
There is much discussion about the payday loan industry. These loan companies have been heavily criticised about the way they treat individuals that get into financial trouble and for transparency in their advertising. Most recently, payday loan lenders have been blamed by many debt management companies and consumer groups for escalating debt problems. The interest rates on payday loans are very high compared to other types of loans and the charges will simply mount up if you cannot pay the loan. If you miss payments the lenders can agree to roll over the loan but you will still be paying the interest on every month you don’t repay what you owe. This can make the loan completely not worth it and if you are already in debt then you risk falling into further debt because charges mount up. With a payday loan you also risk damaging your credit score which can affect you in the future when applying for financial products. Payday loans shouldn’t be used regularly as they are expensive and they should never be used to solve any long term financial difficulties you might have.
The reason why payday loans are so popular is because they can be a necessary lifeline for those who need an instant cash injection. It could be that you need to pay off an electricity bill before it gets turned off, you need to pay for emergency home or car repairs or you just need some extra cash to get by that month. If you make sure you can and will repay the money you owe plus the interest within the loan period and budget the following month they can be a way of getting you out of a tight financial corner. With household finances under pressure, it is no surprise that there has been an increase in demand for these types of loans. The best way to find the right cash advance loan is to take you time and research the different companies, looking at the terms and conditions of each loan as well as the interest rates. Before you consider a payday loan you need to make sure you know the facts and you may wish to seek independent financial advice before applying.