Taking out a payday loan as an advance on a paycheck is a useful solution in a monetary emergency, but it requires caution and careful management. Since payday loans advance solutions are designed to manage short-term needs, consumers will want to look at every detail to avoid complications when borrowing funds.
How It Works:
Before it is possible to determine if the funds are appropriate for the situation, consumers need to understand how the cash is provided and when the loans are due. The debt is not like the typical loan because it does not usually have an installment plan applied to the account.
A payday loan is a short-term emergency loan that provides immediate funds to adults with a steady income. The funds are used as needed and the cash is repaid in full on the provided due date. Depending on the loan, the due date will vary. In most cases, the loan is provided for one to two weeks and is paid after receiving a paycheck from work.
While the advance is easy to obtain, consumers must keep in mind that the full amount of the loan and added fees are due within one to two weeks. If the funds are not repaid, then the loan will roll over to the next payment period and charge double fees.
High Interest Rates:
A payday loan will always have a higher than average interest rate on the loan. Since the funds are provided in an emergency situation, consumers are paying extra for the convenience. The cash is provided within the same day of applying, so the interest rates are usually very high.
While the costs might not seem large, interest is calculated on a yearly basis. Triple and quadruple digit figures are common because the lender will charge a set fee for the use of funding. A loan that charges ten dollars for every 100 dollars borrowed will end up paying as much as 20 to 40 dollars per month in added fees, depending on the term of the loan and the ability to repay the funds.
Payday loans advance solutions are ideal during emergency situations when cash is needed immediately. If the funds are not immediately required, then it is better to seek a traditional loan. When used appropriately, a payday loan is an appropriate solution to emergencies. The key is remembering the high costs and ensuring the loan is paid in full on the due date.