How much Assistance can Payday Loans Provide

Pay day loans provoke much criticism yet they serve a purpose, providing credit to some of the one quarter of all Americans who have no other means of obtaining credit. Legally licensed pay day loan lenders fill a gap which mainstream lenders leave in the market as millions have no other access to credit for emergency borrowing. They were created to allow those who had no other means of borrowing to receive an advance loan against their next pay check, in just the same way that millions of others draw cash against credit cards when funds don’t stretch.

Advance cash loans are simply another form of credit, available to those with no credit score, or bad credit. They are issued to those over 18 who have a valid checking account and a regular income of around $1000 a month. Although it may appear preferable to borrow from other sources it can take time to both establish credit and rebuild a bad credit history, so the ability to obtain a loan without being credit checked is of necessity to some.

Pay day loans provide assistance to those who need funds in a speedy fashion and don’t have the time to apply for and wait for a decision on a possible bank loan. If a utility company is threatening disconnection it will cost far less to take a payday loan than face reconnection charges. The APR’s on payday loans are quite often misunderstood and one off fees are no more than typical late payment charges from other lenders.

There are many people desperately trying to rebuild their credit history to have access to mainstream lending again, and late payments on any bills will negatively affect their credit score. In such circumstances taking a payday loan to ensure a credit card payment is made on time prevents their credit score being negatively affected.

It can also cost far less than the penalty consequences of making a credit card payment late which would result in a late payment charge and a transition onto the credit cards penalty interest rate. For anyone carrying a sizeable balance on a credit card the last thing they want is 6 months on an interest rate of close to 30%.

In the UK the Office of Fair Trading conducted a year long study into payday loans and determined they had a role to play serving borrowers not catered for by mainstream lenders. There are other alternatives of course with illegal loan sharks, licensed door step lenders and pawn brokers. Most of the criticism that is levelled at pay day loans can be levelled at any other type of lending when irresponsible borrowers use irresponsible lenders, as many mainstream lenders have proved to be.