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Payday Loans

As the name suggests, payday loans are short term loans that are to be repaid on the borrower’s next pay date. Payday loans are unsecured, meaning there’s no collateral required against the loan money.

Payday loans have become immensely popular through the years, as being a quick and easy borrowing solution for individuals with bad credit. Payday loans do not require credit checks, having only the borrower’s proof of income as basis for approval. The applicant will be allowed to borrow a certain percentage of their salary, as long as repayment capacity is proved.

Payday loans are convenient and are easily accessible. When you enter the lender’s office, it only takes a few minutes for your application to be evaluated, and then you can walk away instantly with your cash. The only requirement is your proof of income, and your post dated cheque. In the cheque, you will be asked to write the amount you will have to repay on your pay date, totalling the principal amount and the interest.

Payday loans are simple and straightforward, which is why this loan option attracts many borrowers. A payday loan is actually beneficial if you only need a small sum that you can surely repay on the next payday. This can help you avoid borrowing much more than you need, and in turn the long term repayments in much larger loans.

However, as simple as a payday loan might seem, there’s still a catch, as with any other loan. First, payday loan APRs are extremely high, compared to standard loans, and even loans of its kind. Interest rates can mount up to 1000%, which can be unreasonably high for a small, short term loan.

Second, because the length of time to pay off the loan is short, many borrowers find themselves unable to produce the money needed to settle the balance in one lump sum. While a payday loan is designed so that the borrower can clear the debt quickly, it simply doesn’t make sense to loan money and miss your payment, because it will revolve into a much larger debt.

While payday loans may offer quick fixes during times of sudden financial shortfall, opting for this kind of loan should be taken with extreme caution, because what you thought could help you can bring more financial distress. For a much better alternative, check out our bad credit loans by visiting our homepage.