Payday loans are normally a basic type of loan that is typically accompanied by relatively steep interests to satisfy personal needs such as bills, among other necessities in life. These are loans are repaid as soon as the borrower obtains his or her paycheck hence the name ‘payday loans’. While the lack of liquid cash is one issue which the payday loans are capable of solving, consumers need to be aware of the disadvantages that come with such a credit product and weigh the possible consequences before taking one.
This article will discuss payday loans, how they are given out, and what one must know about them. It will also highlight the pros and cons of borrowing through direct payday loans and provide a guide on how to look for the best payday loans direct lenders today.
How Payday Loans Work
It is an unsecured loan which is usually below $1000 but it can also be larger depending on the loan tenure and the credit ability of the borrower. These are mainly designed to be repaid in one lump sum before the next paycheck and range between two and four weeks. This implies that the principal amount of the loan, interest charges as well as fees, are compounded into the repayment date hence making the extent repayment to be made at a specific time only from the side of the borrower.
A payday loan is as easy and fast as the name of it suggests, and this is a brief description of how it works. It has been found that a number of payday loan direct lenders accept applicants who complete the application forms online; in some cases, applicants require a valid ID, proof of income, and an active bank account. The up side of this is that when a loan has been approved the amount which depends on the borrowers situation is normally processed and wired in the borrowers account in 24hours or sometimes within the same day.
But the advantage that these loans have is that they are fast and many people rush to these loans because they cost a lot of cash than the amount that one is borrowing. This influences borrowers into increasing their debt since in the event they are unable to repay the loan within the specified time, they are charged other premiums.
The Benefits of Direct Lender Payday Loans
When considering payday loans direct lenders, borrowers have two main options: getting it from the right source – either from the direct lender or from a broker who brings them together with several lenders. Hence the benefits of a payday loan direct lender only include as follow the procedure is relatively easy and flexible nature of the loan arrangement.
Faster Processing: Direct lender payday loans are those in which the borrower goes to the company of his/her own choice, which is going to offer him the loan. This can ease the approval process in that there is no middleman through which the money is funneled to.
Transparent Terms: When one has gone to a payday loan direct lender, he or she can understand the loan they offer and the service conditions better. In this way, since you are working directly with the lender, you are saved the scrutiny for any extra fee that may be levied by the brokers.
Consistency: Direct lenders are also more standard in their approach as compared to the indirect ones. The major advantage of short term borrowing is that you are dealing with the same company when you are borrowing the money, and when you are repaying; it becomes easy to solve any issues. However, if you use brokers you are taken to so many lenders and this complicates what is supposed to be customer service.
Things to Keep in Mind Before You Get a Payday Loan
While it is true that there is always some help that we can get under some conditions payday loans do not suit each need. That is why there are some questions that need to be answered before choosing a final decision on borrowing money.
Interest Rates: Payday loans are a type of loan that can be paid only with the next salary with really high added costs. The advantages that are in the offer when it comes to these loans may include the fact that you get the money without delay, although it’s important to note that the charges of these loans can go high if you are unable to pay back the said loan on the agreed date.
Repayment Terms: The common feature is that it arose as a small amount of money, which is paid together in one lump sum on the day or paycheck. This may, nevertheless, stretch someone who is already broke since it will help to know the date by which the borrower is expected to reply in cash with the money borrowed.
Potential for a Debt Cycle: This implies that you may land in a position where you are already taking another loan in order to repay the first loan making it very unadvantageous. Lenders do not allow borrowers to make early payments on the loans; in case you fail to pay the loan at the agreed time, you may be required to ‘roll over’ the loan or renew it, which incurs extra fees for the extension of the loan duration. This makes it even more hard to repay in full hence more borrowing is made, hence we have the situation above mentioned.
Alternative Options: So, do not rush to turn to payday loans first, it is desirable to find out what offers have been prepared for customers. Amongst the issues that may be taken into consideration are. Negotiating with the creditors to bring down the interest rates one can borrow some amount from friends or relatives; one can also borrow from other commercial banks or credit unions which charge appallingly low interest rates.
We hope you found this blog post on Understanding Payday Loans: How They Work and What to Consider, useful. Be sure to check out our post on Tips on Using Hard Money Loans for Real Estate Investments for more great tips!
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