Are you going through a financial struggle that is leaving you without the cash you need to fix it? While you can always ask friends or family members, doing so may not be an option for you. This leaves you looking into other ways to borrow the money that you need. This is why many people turn to payday loans since you are borrowing money from your future paycheck that you know will be coming. Here is what you need to know about this type of loan.
Payday Loans Have High Interest Rates
Even though the money to repay the loan will be coming within a week or two, know that payday loans have a higher interest rate than other types of loans. This is because a payday loan is inherently risky for lenders since the borrower is essentially living paycheck to paycheck. The lender wants to ensure that they are paid back the money that is borrowed, and a higher interest rate lets them hedge their risks by lending money to more risky individuals.
Payday Loans Are Paid Back When You Next Get Paid
The terms of a payday loan are relatively short. While personal loans for a bank can be paid off after many months or years, a payday loan is designed to be paid back the next time you get paid. This means that the amount that you are borrowing should be less than what your next paycheck is, which will help you avoid paying any additional interest at a higher rate to extend the loan. Be aware that there are limits to how long you can extend a payday loan. Your lender will let you know what their borrowing limits are and how to extend the loan if necessary.
Payday Loans Are Easy To Receive
One reason that many people turn to payday loans is that it is easy to get one. It is common to have an immediate approval process after submitting an application, and many payday loan providers have extended hours to make them accessible.
There are also fewer requirements for a payday loan. There is no underwriting process where your finances are analyzed to see if you are able to pay back the loan. Instead, you typically just need to have the right identification to apply. This includes an ID and a regular source of income. The payday loan provider will not even run a credit check, so your credit history is not even considered.