Payday loans

By: Jamie Hanson
A payday loan is a short term loan being borrowed by a person to take care of an urgent expense. The loan is cleared on the next payday along with an accrued interest. These loans are also known as cash advances. Cash advances can also have a connotation in regards to the credit cards.

Generally payday loans are being taken to meet certain unforeseen expenses which crop up urgently. If there is no friend you can borrow from and moreover, you have a poor credit history, then you are left with no option but to take a payday loan. There are over 10000 payday loans stores in US itself. Apart from this, there are innumerable online stores offering the same bounty.

But are they bounties? Not by a long way. Payday loans are criticized all across the world and are also engaged in various legal battles for profiting through the plight of middle-class gentry. The interest rates are wickedly high. In fact, it is a mockery of banking norms. The rates vary from 15 to 30 percent for a fortnight. When translated to a yearly percentage, this may amount to 180 to 360 percent. For instance, if you avail a loan of 1000 dollars till the date of your next salary, you will have to write a post dated check of 1150 dollars to 1300 dollars depending upon your state of residence. The loans are hence criticized for promoting a debt trap.

It is not right to take payday loans for the purpose of fishing the money out on weekends. Yes, for an urgent necessity, it can be an effective bailout but it shall only be used for this purpose. Further, it is important to take only that much amount of loan which can be feasibly paid at the payday. Unwarranted money lending can create grounds for a vicious cycle of debt. Also, a borrower should try not to flip the loan to next payday and next payday and so on; because this way, he will lose 15 percent of minimum capital per fortnight. For instance, a payday loans flipped for a year sucks 4 to 8 times the loan amount in a year which means if you take a loan of 1000 dollars and flip it the whole year then you will have to pay something like 5000-9000 dollars in a year. Now this is blasphemous.

Payday loans have partly succeeded because they do not generally require a credit check. Borrowers are either needy people or they are simply besotted to the concept of borrowing. If they have a poor credit track then there is no chance of borrowing money from banks, even credit card cash advances cannot be availed. The payday loans come to the rescue and are easily available without credit check. Amount up to 1500 dollar is made instantly available. Few offline lenders look for decent bank statement and some associated paperwork. Online payday lenders do no ask for any documents generally.

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