In the flourishing world of borrowing money, one of the most controversial loans on the market are payday loans, or advanced cash payday loans. Demonized by the more established lenders and used by those who primarily do not have access to other means of borrowing, payday loans fill a gap. They come with a rather seedy image but are gradually becoming more main stream. They are useful to many and should come with a health warning for others.
Payday loans began in poorer neighborhoods and were found in neon lit shops which provided cash advances in return for a post dated check. These days the shops are just as likely to be found in middle class areas, as those who once turned to credit cards for their borrowing needs find there is no available credit left open to them.
Almost anyone can meet the criteria for a pay day loan as long as they have a current checking account and a regular fixed monthly income. The benefit of payday loans is that they are not determined by ones credit score and can be obtained by those with bad credit or no credit history. They are also incredibly fast to organize unlike loans obtained from more traditional lenders. An instant decision can be given.
Payday loans are short term loans which are given to those who qualify, for a fee. The loan is to be repaid by a set date, usually the next pay day. They are ideally used by those who need a quick emergency loan for something essential such as a vehicle repair, or to prevent a utility being disconnected.
There are no hidden charges and the borrower knows up front how much the loan will cost. Much criticism is made of the way in which the fees are levied at high rates, and how the use of payday loans can lead to a spiral of debt. The same is true of any kind of credit or loan which is misused though.
There is no longer any need to call into a payday loan shop to obtain a loan as they are available on the internet. Careful shopping around on line can lead the borrower to introductory offers on payday loans with no fees, or reduced fees, so it pays to shop around. Once the loan is agreed the funds will be deposited in the applicant’s bank account and then withdrawn, together with the fee, on the agreed date. As the sensible borrower uses them only occasionally for an emergency situation they can be actually be a low cost way of borrowing.
Naturally the borrower who uses payday loans for a night on the town and then takes another payday loan to pay off the first loan will fall into the debt trap, but this simply mirrors the way in which pawn shops were often used before loans were available to a large sector of the population.
Not every state allows pay day loans due to the insalubrious image connecting them to loan sharks. However state legislation is in place in other states to control any sharp practices. Like any other financial product the emphasis is on the borrower to know what they sign for and payday loans remain a convenient method of getting by between paydays for a growing sector of society.