Understanding What Payday Loans Are
Also called payday advance or cash advance, a payday loan is a short-term and unsecured loan for those who have previous employment history. In order for a borrower to get approval for a payday loan, he/she must have previous payroll and employment records. This is the only requirement that financial institution asked from someone who wants to apply for a payday loan.
Various states around the country have different rules and regulations for a payday loan. But they most certainly agree on one thing—that an approved payday loan should be fast and easy. There should be no additional requirements other than the basic ones; and the money should be released the same day that the loan was made. This is why payday loan has become something of a salvation for most people who cannot make ends meet before the 15th and the 30th of the month.
Unlike credit cards and bank loans, a payday loan is relatively easier to manage. Once you receive the loan, you will have about two weeks (up until your next salary) to pay the loan. This way, you are obliged to settle the debt instantly without the additional penalties and interest charges that credit cards and banking institutions impose. Of course, an interest will be charged on top of the principal amount you received, but that would be minimal compared to the financial interests that a credit card or a banking institution can charge you over the years.
Another good thing about a payday loan is that most of the institutions that let you borrow using such scheme can allow you to have an extension. This means that even if you have not settled the loan during the two-week period, you can still apply for an extension period. This will give you more time to raise the money you need to pay the loan. And more, payday loans do not permit interest compounding. So, no matter how long it takes you to pay the principal fee, it will remain the same. No interest charge can be added to it.
However, there are certain downsides to not being able to pay the loan on time, so one has to be very careful about borrowing only what he/she can actually pay at the end of the two-week period. Fees may incur and even bounced check charges can affect one’s financial history. When it comes to payday loans, the same attitude towards mortgage payments and credit card dues should be applied—pay them on time and try to settle the whole debt as scheduled. Not doing so will only affect you and your family financially.
Payday loans can significantly help one person to make ends meet. So, as long as a person is responsible enough to know when and how to apply and settle a payday loan, there should be no cause for concern in using such a loan scheme.