Payday loans are also known as short-term loans. These loans are generally used to get through an urgent rough spot. Sadly, there are only a few cases where these loans really ended up being useful. But before you opt to go for Payday Loans, just make sure that you understand the cost along with the risk involved.
What are Payday Loans?
These loans are small loans that anyone can use when they are temporarily out of money. Generally, these loans provide you with a modest amount of money for 2 days to 2 weeks or so. In order to get a payday loan, you have to write a check for the exact amount of money you want to borrow along with the processing fee. Also, you have to give that check to the lender, and they will cash it out once you are ready to pay them back.
These are also known as no credit check loans. So, you do not need to have a good credit score and wait in order to get it approved. As a result of which they become popular with the people who are facing some financial problems in life.
Costs Involved in Payday Loans
Unfortunately, Payday loans are very expensive. You may end up with an annual percentage rate that can be various 100 percents.
Payday Loan and the involved Pitfalls
Here, the main pitfall with these types of loan is the cost involved. Due to the extremely high fees, they do not help to resolve you money-related problem. So, if you have some financial crises, the Payday loans can also make your situation worse. This is all because you are paying high fees along with high rate of interest which means that the expenses for you will only go up rather than coming down. Also, just like a short-term strategy just for once or twice in your life, these loans can really help you through the rough patch.
For example, you need money of your emergency treatment at the end of the month and you are also earning a lump sum of income which will be released in the first week of next month- well, keep earning income as you can repay it all within no time.