Payday Loans are Proving to be Reliable Funding Options
The market has changed
The payday loan is a viable option in today’s market. Although a few short years ago the lending world was giving out money freely, things changed after the recession. Lenders were tight-fisted with money due to the huge amount of defaulting loans they had on their hands. While that saved them additional losses, it did little for consumers who were still in need of finding funding to pay bills. Many consumers turned to the payday loan as an option for paying emergency bills. Although these loans traditionally have a much higher rate of interest, if used properly, they can be viable solutions to budget shortfalls.
The payday loan
A payday loan has few requirements for consumers to meet. Normally all a customer needs to apply is to be over 18 years of age, have an active bank account and be employed. Some companies employ other rules, but in general, these are the basics. The application process is simple and quick. If a customer applies online, they usually get an answer regarding their approval within minutes. If they are approved, then the customer is given an amount of cash that is deposited into their bank account very quickly. The amount they receive is based on their income and can vary greatly between applicants.
When it comes to paying back the loan, it’s just as easy. The loan company will automatically deduct the loan amount and the fee they charged, from the customer’s bank account on a specified date—usually the next payday. The simplicity of these loans is what makes them so popular among consumers. They are quick, convenient and offer necessary cash to those who qualify.
The one downside
There is a downside to payday loans. The loans are meant to last for a very short amount of time and customers who use them this way should find them helpful. If a borrower doesn’t have the money on the specified date though, they can extend repayment to the next payday, but with a huge interest charge. This is where many customers get into trouble. Nancy Mae of Full-Time Lenders, Inc., said, “It’s crucial to pay off the loan and stay within the timeframe created. Customers who use their payday loan as a loan without an end-date end up paying huge fees. Interest on these loans can be as high as 50%.”
The wise way to manage a payday loan
The wise way to manage a payday loan is sticking to the framework created when a consumer first took it out. These types of loans can be especially helpful, but only if they are used in the way they were intended. They were meant to be quick-cash options for borrowers with an emergency shortfall in funding. Mae said, “People who use payday loans effectively are the ones who understand funds will be taken out of their account on the next payday. They are able to budget for it.”
Borrowers who are using these loans primarily because of a time issue, are normally the ones who use them most successfully. Mae added, “Payday loans are a great way to get money now as long as consumers understand that they have to pay it back when the loan is over—normally in two to four weeks.”
Payday loans are helpful if used carefully
Payday loans can be helpful. The problems come in when people don’t commit to paying the money back on the specified date. Loan companies will take the interest payment, but then the total, plus an additional fee is rolled over. The longer they wait to pay the loan, the more of a strain it becomes.