A payday loan is an unsecured loan where you can borrow money from an online lender as quickly as possible. Although some local stores also offer this lending option, you can save your time and energy by filling an online application form. You can check a guide to payday loans to know about this lending facility.
It is the Shortest-Term Loan
If you want to borrow money for one week or more, then certainly payday loans are the most suitable options. However, when you know that you can’t arrange funds quickly and less than a month, it’s better to avoid it. Financial experts advise borrowers to consider payday loans when planning to pay it back with their paycheck. When no such plan is there, then it’s better to tap on other lending options. In case you need a loan to handle an emergency, but with a longer-term than a payday loan, it’s better to borrow money against your car title.
It is Not an Installment Loan
People think that a payday loan needs to pay back in installment, which is nothing but a misconception. You will have to repay this loan in full amount plus interest. APR rate varies from one state to another, but it is something between 300 percent to 700 percent. If you compare it with a credit card advance, you think that going with a payday loan will save you money in interest rates. However, still, this loan is expensive in comparison to a title loan. If you borrow $100, you will have to pay back $125 on your next payday. The name of this loan refers to your paycheck. It means when you will get your salary, then you will repay this loan.
It may kickstart a Debt Cycle
Most people get payday loans to handle their emergency cash requirements. Since it’s an unsecured loan and none of their asset is at stake, so they don’t care much about it. This approach is nothing but a big mistake. If you are not planning to pay it on time, your loan will roll over to the next payday and cycle continuously. This rollover also increases your debt cost, and if you continue this pattern of non-payment, you will put yourself in a never-ending debt cycle.
It offers a Low Amount Loan
You can’t borrow too much from a payday loan, the range of a loan amount you get from this option is between $100 to $500. Since it’s an unsecured loan, a lender doesn’t take risks to offer you a significant loan amount. When you have a medical bill of $1000 to handle, then certainly a payday loan won’t help you much as you have to arrange half the amount from another source. In that case, you should either opt for a car equity title loan or an auto title loan; in both cases, you can expect to loan more amounts based on your car’s value.
Wrap up
A person should opt for a payday loan as his last resort, as this loan is featured with a high-interest rate. It’s good to tap on alternatives to payday loans first. If nothing works for you, then you should give this loan a try.
