In a great number of places around the world, a new type of business has begun to spring up. These businesses specialize in lending people money for a very short term, usually just until their next payday. These loans come with very high interest rates when compared with more traditional loans. With that in mind, are payday loans really helpful?
The answer to this question depends on a number of factors. One is what the loan is to be used for. If it is to cover a sudden emergency that has come up and there is not enough cash on hand to meet the need, the loan may be very helpful for getting past a bump in the road of life that could cause major problems.
If one is considering one of these loans to get some cash for spending on something one wants, but does not absolutely need at that moment, these are not the best way to borrow money. In general, borrowing money to satisfy wants instead of needs is a bad idea altogether. Payday loans cost so much more than other types of credit they are truly for emergencies only.
Another factor to consider is how much money is needed. Most payday lenders will allow a person to borrow up to around 400 USD or the full amount of one paycheck, whichever is less. However, just because that amount of credit is available does not mean that one should use the entire amount. It is important to be able to pay off these loans completely with one’s next paycheck and still have money to meet one’s normal financial needs.
Many lenders will allow a person to extend their loan up to a month at a time. After that month, if the interest and fees are paid up to date, the loan can be extended again. This is where payday loans really begin to cost a great deal. If the money is needed to meet an immediate, unexpected need and is paid back in the shortest amount of time, the loans are helpful. Otherwise, they can do more harm than good financially.
Finally, one should consider whether there are other types of financing available that do not cost as much. Perhaps one could borrow from family members or friends for short term emergency. Even if these individuals ask for some interest on the loan, it will likely be much less than a payday lender would charge.
Even taking a cash advance on a credit card comes with a lower APR interest rate. There are also some banks willing to make personal loans for a short term if one can show both need and the ability to pay back the money. If one absolutely must have the cash right away, and no other form of financing is available, payday loans may prove very helpful.
Answering the question of whether payday loans are helpful is a bit complicated. One must ask himself/herself several questions before taking out such a cash advance loan. However, if the answers all come up that this is the best way to meet an immediate need, the availability of these loans can prove to be invaluable.
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