In recent years there has been something of an explosion in advertising for pay day loans. But what does the term mean and how can this type of loan actually help you?
It is a surprisingly easy concept to understand in actual fact. Pay day loans are short term loans usually consisting of relatively small sums for which the borrower pays a fixed fee. This is charged at an amount of interest or fee which the borrower pays upon the repayment of the loan. The loan is usually repayable on the borrower’s next pay day hence the name.
There are a number of advantages to borrowing this way. Firstly as the recipient of the loan is only borrowing for a short time there is no long term commitment to paying off large amounts of cash over a long period of time if you only need the money for a short time. Borrowing large amounts of money even if only to cover short term need can often lead to many complications.
Repayments are often intended to continue over years and you may end up borrowing more money than you ever intended to. This means that monthly repayments will be sucked out of your pay packet potentially for many years. These are usually taken out of your bank account on the same day every month by a fixed standing order which cannot be changed. This means that you can suddenly find a bad month financially leaves you exposed to missing payments.
Not only can missing payments cause you endless problems with your credit rating it can also lead to bank charges for going over overdraft limits and similar problems. In other words you can become entangled in the kind of financial mess which would probably delight certain unscrupulous operators in the mainstream banking industry but really does very little for your life in any way at all.
That means that a short term pay day loan is often the best solution to a temporary financial problem. Those kind of problems can take a huge variety of forms too. Sometimes it might be a child in the family needing a new pair of shoes. On other occasions it might just be a big night out with a friend that you have planned for months but then suddenly the car breaks down needs fixing and all plans are off. In both of these examples a short term loan would be a good way of resolving things quickly and relatively simply.
Another factor in favour of using pay day loans is the convenience that they offer. Most applications for this type of loan are handled over the phone. This makes things much more straightforward than filling in the paperwork that normally accompanies a more usual kind of loan. A decision on whether to grant the loan is also usually made within 15 minutes or so. This means that the borrower does not have to wait days and weeks while their application is assessed with no guarantee of the funds actually being released at all. The worry and anxiety of borrowing money is therefore considerably reduced.
This means that pay day loans can be the answer to a whole range of short term financial issues. Convenient to apply for and relatively easy to obtain the only qualification that you usually require is to be in work. Many companies offer loans via their websites too where the interest on the loan can be easily calculated. While this kind of loan can never really be the answer to long term financial issues in the short term it can be a massive help.
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