Finance and Personal Lending

Personal finance news and information.

These days payday loans have become an incredibly popular option for those who need to borrow money, and it’s important that you know why before making a decision. While it’s true that there are many benefits associated with payday loans, they aren’t right for everyone. The more time you take to look into these loans, the easier it will be to decide whether or not to apply for one. The last thing you want to do is to rush into a final decision that you will end up regretting later on.

What is a payday loan?

First you will need to know what exactly a payday loan is. Simply put, it is a short-term loan that you will need to pay back within 2 weeks (with your next pay check.) These loans are typically for smaller amounts, but it all depends on your qualifications. Some people are able to borrow more than others, but the maximum amount is somewhere around $1.500 to $3,000. The more money you make from your job, the more likely you will be to qualify for a higher borrowing amount.

Your Credit

It is important to keep in mind that an overwhelming majority of payday loan lenders do run credit checks on applicants, but having bad credit doesn’t necessarily mean you will get rejected. The fact is that a lot of people who have less-than-perfect credit get approved for these loans all the time, so you shouldn’t let your score discourage you from applying. There is never any guarantee that you will get approved, but the better your credit is the higher your chances will be.

When to take out a payday loan

You only want to take out a payday loan if you are in desperate need of cash for some very important expense. If you have an auto repair, hospital bill or some other crucial expense that has suddenly come up but you don’t have the money to cover it, a payday loan can be an excellent option to explore. Most of the people who apply for these loans do so because they need a significant amount of money fast. If you are approved for a payday loan, you should receive the funds within 24-48 hours at the latest. This is why payday loans are such a good option for emergency expenses that are time sensitive.

Interest Rates

It’s also important that you remember that payday loans typically come with higher interest rates than other types of loans, though they usually aren’t as bad as many people make them out to be. The rate that you get for your loan will depend mostly on your credit, though there are other factors that come into play. Those who have good credit can expect to pay a more reasonable rate than those with a very low score. The interest on these loans has definitely been exaggerated though, so don’t let that scare you off.

Paying back the loan

If you are seriously considering applying for a payday loan, you will need to keep in mind that you’ll only have about 2 weeks to pay it back. Some lenders will give you an extension if you are not able to pay the loan back on time, but you will incur some pretty hefty penalty fees as a result. You will definitely need to make sure that you only take out as much as you can afford to pay back. It is highly recommended that you take the time to crunch the numbers and decide how much you can realistically afford to borrow before filling out an application online.

Final Thoughts

You do not want to rush into getting a payday loan, because doing so could come with disastrous results. Failing to pay back one of these loans will result in a big negative mark on your credit report, which is the last thing you want. Payday loans can be very helpful for many people, but they aren’t a good borrowing option for everyone. If you have been denied different types of loans in the past, you may want to think about applying for one of these. While there’s no guarantee your application will be approved, it is still worth trying.

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