When you don’t have enough money with you, it’s hard to know where to turn. Borrowing money from family and friends is a popular option, but not one everyone can rely on. For individuals who need money quickly—either because they’ve lost income and need money to cover essentials or because they face an unexpected expense—there are borrowing options, including personal loans and payday loans. Payday loans are widely advertised—and there’s even a new set of trendy, upbeat apps and websites like paydayplus.net that offer what are essentially payday loans
What is a Payday Loan?
A payday loan is a small, short-term, high-rate loan. Payday loans work this way: A borrower writes a check payable to the lender for the amount the person wants to borrow, plus the borrowing fee. The lender gives the borrower the agreed-upon amount of money and keeps the check until the loan is due—typically on the borrower’s next payday, hence the name. The lender then deposits the check, getting back the money they lent plus the fee. The borrower will have the amount of money they borrowed taken straight from their bank account. Payday loans are too good to be true since they’re more accessible than a personal loan or a credit card cash advance.
Why people take Payday loans?
Payday loans help you get the cash you need quickly, which makes them an attractive option for borrowers with poor credit or little to no financial history. Here are a few reasons why someone would get a payday loan:
1. Holiday shopping:
A payday loan could seem like a convenient way to immediately get the cash you need for last-minute holiday shopping.
2. Emergency expenses:
An emergency expense like a car breaking down or unexpected medical treatment can be jarring to your finances. For those with poor credit, a payday loan can seem like the best option to pay for a hospital stay or car repairs.
3. Cash with bad credit:
If you don’t meet the credit requirements for a personal loan, payday lenders tend to require less from borrowers in terms of financial health and credit.
Payday loans can certainly be beneficial under the right circumstances. If you have a sound financial history but just need a bit of extra cash to cover an expense, a payday loan could be a great option. Before getting a payday loan, speak with banks and credit unions about your loan options and find the best rate available.