Payday loans, also known as cash advance loans have become a popular type of loan that many people seem to run to when they need some quick cash. The reason for the popularity of these payday loans is due to th simplicity in getting one of these loans. The only requirements that someone will need to get one of these loans is that they have a job and have a bank account. Beside those two things, the only information that is needed is basic stuff such place of residence, identification, and things of that sort.
When someone is deciding if they should get a payday loan or not, they will need to think about if they really need the quick loan or not. Why? Because these type of loans can be very expensive. Many people get themselves into a mess that they cannot seem to get themselves out of when they get these loans. The interest rate that cash advance loans charge is considered usery to many people. There have been arguments on both sides of the topic about the services of cash advance loan companies.
We will not go into great detail here about payday loans and how they work, we will just explain the basics here of how they work. We will assume that you have general knowledge about payday loans and how they work. We will just briefly talk about how cash advance loans work and then will talk about if you should get a payday loan.
How much money can I borrow with a paydy loan compay?
The amount that someone can borrow will vary depending on the company and by how much money that they make. When someone applies for a loan, the company will ask them for their proof of income which basically plays the biggest part in how much money they will loan an individual. This only makes sense as they will need to know that the loan can be repaid when the individual receives their next paycheck.
The amounts that these companies will loan is usually no more than $1,500.00. They give each person a maximum that they can borrow based on how much money they make. A person does not have to borrow the max amount and can borrow less if that's all they need.
When will I have to pay back the loan?
Payday loans are usually due in full when someone gets their next paycheck. This of course makes sense since these loan are called payday loans. If the full amount cannot be paid, the cash advance company will allow an individual to pay part of the loan off (at least the interest) and carry the remaining balance until their next paycheck, which is usually one or two weeks later.
Should you get a payday loan?
Cash advance loan businesses have been around for a very long time and has been a service that has been widely used. Local payday loan businesses used to serve only local customers, but with the birth of the Internet some companies also serve customers online. There are even some companies that run their entire business online. The Internet has made getting a payday loan much easier now, there is no need to even leave the house to get the cash. When someone finds the company that they want to use, they just fill out the information that is needed and just like that - They can have the cash requested in their bank account the next day.
As we have mentioned earlier, payday loans have their critics who are against these companies lending short-term cash advances. They argue that the borrower will get into a cycle that they cannot get out of. It is very understandable to see why these people feel the way they do. Some individuals do not have any business getting a payday loan if they do not have any intention of paying the whole balance off when they receive their very next paycheck.
Let's look an example that is way to common for payday loan borrowers:
Let's say that a man Mark gets a cash advance loan on a Tuesday for the amount of $500.00 and he does not have to pay the loan back until the following Friday. Mark gets paid every two weeks so he will have 10 days until the loan has to be paid back. Everything seems fine with Mark and life is good, but days before the loan is to be paid back, he realizes that he will need his paycheck for something else. Maybe another unexpected bill came up, maybe he needs the money for some other reason, maybe he just don't want to be completely broke until his next paycheck. He knows that his check will cover the loan, but then he will not have enough money left over for gasoline, food, ect. for the next couple of weeks until he get paid again. Mark will feel that he has no choice but to extend his cash advance loan. He extends the loan and will only pay the interest charge on the $500.00 loan which as an example here would be $80.00.
Life is good again for Mark and he has another two weeks until the payday loan becomes due again. When the time comes to pay back the loan again, Mark needs the money to help cover his rent, so there he goes again extending the loan another two weeks and paying only the interest again. His balance remains the same as when he started this cash advance loan and has not gone down at all. Unfortunately for Mark, he will have the same problem every two weeks until the time comes when he can pay off the loan. To make matters worse, the interest rate that is charged by payday loan companies is high compared to other types of loans. To be paying the loan company the interest only every two weeks is lots of money wasted that someone should not be having to pay.
Let's look at an example of how a payday loan should work
For individuals who need some quick cash for a good reason, a payday loan can be a life saver. Notice the words "GOOD REASON." Payday loans should only be taken out when the individual absolutely cannot wait for their next paycheck. The reason should be an emergency such as needing to repair a vehicle, an emergency bill that needs to be paid or other things of that nature. These loans should not be taken out because someone is going to Las Vegas with their friends and will need some spending money. I'm sure you get the idea here.
An individual needs to plan ahead and look into their immediate financial future. They will need to be sure that they will be able to pay off their payday loan when the pay back date comes. These cash advance loans were made to be short-term loans, they should not take someone months to pay back. If the loan is paid back immediately like it is supposed to be, the loan will not cost the borrower much. The problems arise when a borrower lets their loan drag on for months.
S0... - should you get a payday loan?
If you feel that you are responsible enough and have the capability to pay it back in one payment when you receive your next paycheck - Go on ahead and get yourself a payday loan! If you are not sure of yourself that you can pay back the loan with your next paycheck when the due date comes up - Do not get the loan!
I am not someone who is against payday loans or for them. I know that for some people they are good and for others they are not. I am one of those people that they can and do work for, I have also seen people though who have put themselves in a financial cycle that they cannot get out of with these loans. I will tell you that I am someone who does get payday loans myself even at times when I am not hard up for the cash. I use these loans as sort of an investment. This article is not about that though and maybe I will write about that when I have the time.
Back to the subject here - What this comes down to is financial responsibility, if you are doubting yourself and even thinking that there might be a chance that you will not be able to pay back the cash advance loan with one payment, you probably should not get it. Are you confident that you will be able to pay back the cash advance loan with your next pay check without it influencing your life too much? - Get that payday loan.