Money - Personal Finance
By: - at February 4, 2013

What are Payday Loans and why Payday Loans?

Why Payday Loans
Payday LoanMany people in countries such as the USA, Canada, the UK, Australia, and some other countries in Europe are turning to payday loans to deal with their urgent financial needs.  In truth, millions of people from the above mentioned countries are taking out payday loans to solve their immediate financial crisis.  However there are concerns from many borrowers among others whether or not payday loans, which are also known as cash advances, are a viable option to solve a short-term cash crisis.  Payday loans are not meant to solve long-term financial hardships.  It is a quick but expensive solution to an emergency where cash is desperately needed.

What are Payday Loans
Payday loans are short-term loans that come with very high interest rates.  Payday loans are basically designed for people who are working but cannot make it through to the end of the month until their next payday or paycheck.  It is designed for any person who needs some fast and instant cash that he or she cannot get immediately from other sources.  These are people who have no money for a given period of time or who have a cash crisis in between their paychecks, and often turn to lenders who provide payday loans.

How to Get a Payday Loan
Anybody can apply and get a payday loan provided they are eligible to apply for a payday loan.  Also payday loans do not require a credit check where most loans from traditional sources like banks do.  The requirements to be able to apply for a payday loan may slightly vary from country to country where this kind of loan is available.  The following is the criteria for anybody who is applying for a payday loan:

- The applicant must be a resident of the country where the application is being made.
- The applicant must be at least 18 years of age.
- Must be employed full-time.
- Must have a current checking account with a debit card.

If an applicant fulfils the above requirements then he or she may qualify for a payday loan up to a certain amount of money.  Based on the information provided by the applicant on their application, the loan's dollar amount is determined by the payday loan institution as well as the interest rate.

When an applicant applies for a payday loan online, the application is processed the same day and the decision is also made during the same day.  There are no waiting periods or consideration periods that traditional sources like banks have, making payday loans an attractive option for people who need cash fast.  When an applicant is approved, the lender quickly transfers the money to the applicant's bank account typically within 24 hours.

How and When Repayment is made
Payday Loan LenderAs the name suggests, payday loans are to be paid by the borrowers on their next payday or when the next paycheck arrives.  Once the applicant receives their next paycheck, the borrowed amount plus a sizeable interest charge is paid.  There might be options to pay in installments depending on the payday loan provider and depending on the amount that was initially borrowed.  Repayment terms are specified in the loan terms which are presented in detail in the loan application.

Who Needs or Applies for Payday Loans
Most people who apply for a cash advance might need to pay unpredictable or urgent bills, make a credit card payment, pay their mortgage, or pay their rent.  Many people do not want to ask for help from their family members, friends, or coworkers because they do not want others to know that they are having money troubles.  They cannot get quick and instant cash from the banks or credit card companies they have accounts with due to their credit situation.  Also it generally takes some time to get approved by a bank for even the smallest loans.  As a last resort they turn to these payday loan providers in order to get the money they need.

Recommendations
Payday loans are by no means a long-term solution to a person's financial crisis.  It might be an inevitable or handy option when other traditional options are not able to deal with your immediate and urgent cash shortages.  Besides if you become reliant on this type of high interest loan, you will end up repeating the same course of action leaving you no room to get out of it.  You will be paying a lot of money each time you take out a payday loan in the form of interest.  Sometimes people get stuck in this cycle where they consistently use payday loans just to make ends meet.

Payday LoanYou should always be looking for other alternatives to payday loans.  There are actually many ways you can avoid taking out a payday loan frequently, and keep you from getting stuck in a vicious cycle.  If you have a cash crisis often and if you do not have enough in your savings or none at all, then you should consider doing a bit of extra work during your free time.  You can ask your manager if they can help you get some extra hours, or you can tell them you are interested in getting some overtime.  If you can make some extra money doing some extra work you can save it for a rainy day.

You can also seek out an evening part-time job or a part-time job that you can work on any other day and time when you are available to do so.  If you have unwanted and unused items in your house, you could possibly sell these items instead of going to a payday loan establishment.  If you have a special skill, then you can utilize that and earn some extra cash on the side.

If you are in need of fast and urgent cash to pay bills that just cannot wait, then you can make a request to the companies you currently owe for some more time and flexibility with payments.  You can ask local banks if they could help you with a small loan.  If you need to make a credit card payment but you do not have cash, then you might request the credit card company for a few more days to make the payment.  There are many ways to earn some extra cash and avoid taking out payday loans on a regular basis.  Payday loans are great if they are absolutely necessary and if they are used sparingly.  The point is to not make them a regular occurrence because soon, all the extra money you will need to pay towards the interest can only make your financial situation worse.

Final words
There is no denying the fact that hundreds of thousands of people are solving their financial crisis by taking out payday loans.  Payday loans were recently the focus of debate in the Ohio legislature where some state representatives were advocating for cash advance services to be banned.  The push for completely removing them as an option did not get very far because it is a hard truth that many Ohio families rely on these services.  Payday loans can sometimes be the only option available to you.  If you are solving your cash crisis in the short-term, then payday loans can be very handy.  If you are looking for long-term solutions to your financial problems then there are better strategies like securing additional employment, selling items you no longer use, or picking up extra hours at work.  Cut down on unnecessary purchases and be realistic with your budget.  Payday loans can be sometimes avoided by working a few extra hours, teaching students, consulting your banks or other financial institutions for a loan, and by urging your utility companies to give you more time to pay.  By budgeting your money better and having an honest understanding of your financial position, payday loans can be avoided completely.


 

 

 

 

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