Payday Loans Explained

It can happen to all of us. An unexpected expense comes up, like a broken washer or a car that won’t start. How do you pay for it when you’re temporarily strapped for cash? You can put it on your credit card. And pay it off later, over a long period of time, with interest. Or you can apply for a payday loan.

A payday loan is a small loan, typically in the range of $ 100 to $ 500. The loan carries a high interest percentage, especially when payment is overdue. Like every other loan, the payday loan has advantages and disadvantages. We’ll look at that in this article.

If you’re short on cash a payday loan is one of the quickest and easiest ways to get it. It’s a better way to get money than having to ask your friends or relatives for money. Asking friends or relatives for money can put them in an awkward position, a payday loan is discreet.

A payday loan also has the advantage that you skip a step you would normally have to go through with every other loan: a credit check. The entire process takes under half an hour and you can have the money in your bank account within a day. That’s fast and easy.

If you have short term cash problems, and you’re sure you can pay the payday loan back in time, this is a good alternative for you. But if you’re not sure about your next paycheck, don’t apply for a payday loan. Because you will be looking at some huge interest costs if you don’t pay back in time.

Payday loans can be extended, also knows as a ‘roll-over’. If you roll over a couple times, you will be looking at interest rates high in the double digits. Pretty steep interest. That’s why you always pay close attention to the payback date and make sure, upfront, you can pay it back within time.