There has been a great deal of talk as of late about the fiscal responsibility of taking out a payday loan. However, it is first important to understand some of the reasons why people look to a payday and how a payday loan works. Many people that have a negative sentiment about this particular type of loan may not even know how a payday loan works.
Ideal for Those Struggling with Poor Credit Scores
The first thing to understand is that payday loans are perfect for people who have bad credit. Typically, traditional lenders will look at credit scores. When people need emergency money, but they don’t have a good credit score, they won’t be able to get the money from a traditional lender. Payday lenders are willing to extend loans to people who may not have great credit, but have verifiable income and a checking account.
Payday Loan Interest Rates
One particular downside to a payday loan is the high rate of interest that can exceed over 1000% annually. In addition, if an individual is unable to pay the loan on time, they may incur other fees and penalties. However, the thousand percent interest rate is a bit misleading as this is an annual interest rate. With payday loans lasting about 22 days on average, it’s not likely that a person will end up paying 1000% per year on the money that they borrowed.
While there is some controversy over the benefits of how a payday loan allows a person to repay the loan, some people feel it’s intrusive while others feel it’s convenient. Most payday loans require the borrower to allow the lender to automatically debit a person’s savings or checking account for either a lump-sum repayment or an installment payment plan for the loan.
There are many more details about pay day loans. That’s why, if your credit is poor and you find yourself in need of emergency cash, but you can’t wait until you get paid, a payday loan may be something to investigate. To get more information on some of the pros and cons, you might want to check out a website like https://www.moneyboat.co.uk/the-ins-and-outs-of-a-payday-loan/.