Many people have a deep misunderstanding for payday loans and how they work. A lot of people assume these loans are dangerous and carry some significant risks. It is the complete opposite of reality, and below is the explanation of why it is the case.
Payday Loans – Options for Borrowers with Poor Credit
Payday loans are seen as predatory or taking advantage of people who are in poor financial conditions. It is not the case at all. Rather, payday loans are the one tool these individuals can use when they are struggling for money.
Say you are in a position where you have expenses that must be met in the coming month. You were laid off from your job and recently found a new one. But you are not going to get paid for a few weeks.
That may come too late for some of your bills. Normally, it may not be such a big issue. But you may have been late for a previous month on some of those bills, which means you could lose your power, cell phone connection or other necessary services.
Payday loans can help in such a situation, as you get quick cash in your bank account within days, and there is no credit check.
Mutually Beneficial Loans
The truth about online payday loans for bad credit is they are mutually beneficial. When you look at lenders of an online payday advance with Personal Money Network, you will find some great offers. These lenders are getting an advantage, as they put out money, which they get back in a few weeks with interest.
But the borrower is also benefiting in a big way. They are not only able to get the money they need, but they get it very quickly. Say you have a bill that is due in five days and you must pay it no matter what. The payday loan ensures the bill is paid and it allows you to breathe easy again.
Yes, there are risks with every loan. You are not exempt from those risks because it is a payday loan. But you are also getting a chance to better your financial situation, which would not have been possible without the loan.
Understanding Interest and Payday Loans
A lot of people point to the interest rate when they say there is a problem with payday loans. They say that an interest rate of 200% or 300% APR is predatory and is a problem. But it is not the real story.
Yes, these are some of the interest rates attached to payday loans. But, is there a reason to care about APR if you are paying a loan within a few weeks? The APR is 200%, but you are looking at $40 or $50 in interest payments on a payday loan of $300 or $400. That is not very much, considering you were getting the money in days with no questions asked.
Borrowing Safely from Payday Lenders
If you are concerned about taking on a loan and suffering, you should do your homework. Learn as much as you can regarding the lender. Look at reviews of the lender to understand how they treated other customers. If they have a good reputation, then you are likely in good hands.
Another step that you can take is to make a financial plan. Look at the money you owe, how much you want to borrow, and where you are getting money from in the coming months. Do you have enough to pay your bills with the payday loan, pay back the loan, and meet your future obligations?
When you have the answer to that question, you can take out a payday loan safely. If you borrow the money without any idea of how it will be paid back, you are asking for trouble.
Those who know they will not have enough money to pay back a payday loan should look at other options. Perhaps you can consider a car title loan, or you could borrow money from a family member. Those options would give you more time to pay back the money.
Payday loans are not risky by nature. They are a very good tool for people with low to no credit score. If you have low credit, you can get a payday loan of $500 within two or three days. Then you have a few weeks to pay back the money you borrowed if you want to avoid paying a lot in interest and penalty payments over the coming months.
We are happy to present this collaborative post to offer valuable information to our readers.