Think about a mechanism which involves awarding instant cash to the individuals
whenever required and that too without validating their credit history, sex, gender,
income or religion etc. This mechanism serves as the only means for acquiring immediate
cash as and when desired. Although this non-discriminatory process holds numerous
monetary benefits yet it has a catch. Despite the availability of cash at all times, the rate
of interest charged on them for repayment is exorbitantly high. Moreover, this interest
rate has been designed in such a manner that sometimes it inherently traps the borrowers
in a never ending spiral of financial debt and hardship. This hypothetically appearing
mechanism is what is known as payday loans.
Payday loan's anatomy
Payday loans are nothing but a means of fulfilling instant cash requirements of people
whenever they fell short of monetary reserves. These round-the-year instant loans provide
immediate cold or hard cash and require nothing in return than a post dated check. They
are the most preferred option of attaining cash advances on paychecks and are beneficial
particularly for individuals with bad credit scores or ratings etc. Terms for collateral or
history aren't considered under the payday loans.
Despite these above mentioned benefits, such immediate cash loans also have another
side to them. Their interest rates are so high and are actually expected to be repaid within
a period of two week maximum. Approximately a dollar a day is the additionally charged
amount. Comparing such a fee with other traditional loans shows some really astounding
results. Talking about the APR, it is the Rosetta stone for the lending world. It allows the
borrowers to take a quick look at what exactly their expected loan would cost to them.
Moreover, it also informs them about how much the interest would be charged if the loan
is not repaid for a whole one year. For instance, home loans and auto loans have an APR
below 10% and between 5 to 12% respectively while payday loans have an APR of about
Isn't the rate of interest unreasonable?
Numerous individuals believe that these payday loans charge an excessively high
interest rate just because of the fact that they are granting instant cash as and when
required. Due to this, several states have restricted or prohibited the granting of such
payday loans even. Others have allowed it but have imposed strict restrictions though.
So, just decide thoroughly whether you really need a payday loan or not before falling in
Although the above mentioned disadvantage exists, one very basic advantage is also
associated with these financial loans. They are a synonym to instant cash generators.
No matter what you financial history is, if you require cash you would be granted. Most
individuals require immediate cash at some point of time in their life but not everyone
has a good credit score. This emptiness is filled in by these payday loan lenders who are
willing to offer financial help to the needy but on high interest rates.