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When life throws us a curve ball we sometimes need to come up with a solution and we may have little time to do so. Especially when it comes to financial matters. We can often find ourselves in a position where we need cash and we need it fast. Not all of us have a reliable source of emergency funds we can go to when we’re in need.
For the most part we can go without certain things until payday arrives. If the television breaks it’s annoying but not the end of the world. However, if our car breaks down or the boiler decides to give up this can be much more problematic. It can even be dangerous. When these things happen, we may not necessarily have the funds readily available to deal with the situation. This is where a payday loan can come in useful.
What Are Pay Day Loans?
A payday loan is usually a short-term burst of cash that covers our costs until payday arrives. This can be rather useful in an emergency, allowing us to deal with the issue at hand then pay the money back in the coming days or weeks, once things have returned to normal. Banks and building societies generally don’t offer this service, instead preferring to focus on larger loans (of over $1000) for a longer period of time. Those of us dealing with a flat tyre don’t have the time to arrange a sit-down meeting with our personal banker only to agree to a loan of $1000 over 32 months. We just need $100 for our tyre which we’re happy to pay back at the end of the month. This could only be a week or so away.
Payday loans themselves are usually much smaller amounts of money of between $50 to $500, although they can be higher amounts if the situation calls for it. There are options to pay the money back over a longer period of time, such as multiple paydays therefore it could span a month or so. But in truth, payday loans rarely last this long in most cases. Like any form of borrowing, the quicker they are paid back, the less interest the customer will pay to the lender.
PaydayLoans Scale
Why should payday loans be avoided?
Payday loans should be avoided if possible due to 2 things: Interest rates and payment fees. The APR on payday loans are much higher since they usually just lasts a month. Then, you can also be charged a payment fee for late or missed payments.
How Does Interest Work?
Interest is essentially the profit made by the loan company. Think of it as the fee you pay them to use their services. A payday loan company is no different from any other lender in this regard. They all charge interest and without it they couldn’t run their business to begin with.
The rate of interest is dictated by something called an Annual Percentage Rate (APR). This is a way of working out how much interest should be paid over an average of 12 months. The 12 month number is simply an arbitrary timescale in order to develop a pay scale, but in fact not all loans, especially not payday loans, are 12 months in length. Payday loans only last a matter of weeks, or months in some cases, but generally APR is a universal way for all finance companies to fairly and ethically calculate interest.
How Do I Know A Payday Loan Is Right For Me?
Payday loans exist to help people out of a sticky situation, usually in an emergency or when they need some financial support on a short-term basis. People turn to payday loans usually when they don’t have anywhere else to go and have been refused a loan before.
However, more and more people are using payday loans instead of credit cards and traditional bank overdrafts because they find it cheaper to do so. Naturally this depends on the amount being borrowed and the time taken to pay it back. Many people have an overdraft and a payday loan company on stand-by just in case they need funds from multiple sources.
The service payday loan companies offer is quick cash in a situation when it’s most needed. This is a scenario many of have found ourselves in at some point in our lives, so it’s good to know that there is always a support system available should we ever find ourselves in short-term financial difficulty.
How can i consolidate my payday loans?
Consolidating any finance is pretty simple, first thing to do is contact your loan providers and ask for a settlement figure for all your finance. Then add them all together and contact the debt consolidation loan provider with the overall amount then you can pay them off.
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