Loans, these days, are all around us! We see loan offers not just in banks, but also in electronic shops, in travel companies, in automobile showrooms, and many other places. It seems as if everyone likes to dream big and own fancy things, and loans come to their rescue when they don’t have money to fulfill their dreams.
While for some, loans are necessary because of their financial condition, and are taken for certain important goals in life, such as a study loan, or a house loan etc., for others, loans these days have also started acting as a simple way of getting some quick and easy money. This is where the concept of ‘Payday Loans’ comes in.
What is a Payday Loan?
Payday Loan is a kind of loan, which helps a person to get a small amount of money (till around $2500 or so), so that they can clear off some instant debts or bills, or use the money in case of emergency. The idea of these loans is to help people in times when their next paycheck is just around the corner, but they happen to need money before that.
Thus, ideally, as soon as you get your next paycheck, you should clear the loan amount quickly. Since the rate of interest on these loans is quite high, the borrower must be very sure of the fact that he/she will be able to return the loan quickly. In most cases, the lender only authorizes or grants the loan, when the borrower hands over a post dated check with the total amount payable, i.e. loan amount, plus the interest.
Advantages Of Payday Loans
Payday loans are obviously quite beneficial to those who do not have any savings or credit limit with them. It helps them to deal with emergency situations. It is mostly youngsters, who have just started working, who go for such loans, to help them clear out emergency bills or expenses. With a job that doesn’t pay a lot, most people live on a break-even point sort of a situation, and any expense, such as an accident or a damage coming up suddenly may require them to get additional money instantly. Payday loans come to rescue in such circumstances.
Disadvantages Of Payday Loans
The rate of interest on such loans is very high, and a lot of times people end up paying more interest, than the amount borrowed. This is obviously not advisable, as it leads to a lot of unnecessary wastage of money. Moreover, the conditions related to Payday Loans are quite strict, and can land one in trouble if they don’t pay their loans on time. It will not only create a bad credit history, but can also lead to bankruptcy in cases of people who have low incomes and high expenditures.
So Should You Take Them Or Not?
As long as one is sure of the fact that the upcoming income is going to be at least double the amount of loan borrowed, one can go for the loan. But then again, one needs to calculate how much interest will be charged on the loan, till the time the next income comes. If the income date is almost there, it’s safe to go for such loans. Otherwise, it’s not recommended, especially for those who know that they are weak at managing money and have too many expenses to handle. You’d rather borrow from a friend, who will not charge you any interest.
Lauren Devaney is a blogger and a loan adviser working with www.paydayloansuk.org.uk providing efficient and quick loan services.