Payday loans are the type of short-term cash advance designed to help cover your urgent cash flow needs until you get your next paycheck. These are high cost loans and payments are usually due within two weeks or so of your next payday. They are generally used for small amounts, however, they are one of the more expensive loan options available. It can be difficult to pay off the loan and it could end up costing you a lot more than you expected. Here’s what you need to know if you’re considering buying one.
What is a payday loan?
A personal loan is a cash loan intended to cover you until the arrival of your next paycheck. Once you’re approved, which doesn’t take long, the company will lend you a small amount of money. The average amount you can borrow is around $ 350, but it is anywhere from $ 50 to $ 1,000. You will typically need to repay it within two weeks with fees ranging from $ 10 to $ 30 for every $ 100 you borrow. Fees go up if you don’t pay back on time, and some statistics say 80% of lenders don’t. So, before deciding to go for a payday loan, check if it is the right option for our situation.
How are payday loan fees calculated?
The average payday loan in 2020 was $ 370, while the average interest or financial charge for a loan of $ 370 would be between $ 55.25 and $ 70, depending on the terms you agree to. This financial burden is usually between 15% and 20%, depending on the lender, but it could be higher. The amount of interest you will need to pay is calculated by multiplying the amount borrowed by the interest charges, depending on the deal of course. For example, if you get a loan of $ 350 and agree to a 20% fee rate, the interest charge will be 350 x 0.20 = $ 70. This means that if you borrow $ 350, you will pay back $ 420.
What are the requirements?
Payday loans have a fairly simple application process and a few requirements. You will need a valid ID, a bank account and a verifiable source of income. Once you provide your credentials, banking, and other information and get your approval, you will receive your loan funds. It usually doesn’t take more than 24 hours. As the experts of iCash.ca explain, the easiest way to get money is to use an automated online application. The money goes directly to your bank account and you pay it back with the agreed interest and fees. Payday lenders also offer the option of renewing your loan if you cannot pay it back on time. However, if you are in need of such financial support, it is strongly advised that you plan it very carefully.
The dangers of payday loan
Businesses can force customers to become dependent on them if the loan is due quickly and the fees continue to accumulate. Carrying over your loan to the next month may seem like a great solution at this point, and maybe not a big deal. However, once you start borrowing money, there’s a good chance you’ll never be able to give up. It becomes difficult to repay the loan and continue to cover your regular monthly expenses, so you’ll always need more. Although they offer a quick relief solution, these loans do not offer a permanent solution and you may want to explore other options. Nonetheless, if you do decide to get a loan, make sure you understand the rules and conditions of the game as it is surely easy to get lost.
Alternatives to a payday loan
According to the latest research, an average consumer gets payday loans at least once a year, despite warnings from several specialists about the cost of this system. It is always suggested that you explore alternative options to cover your immediate cash flow needs. There are many other ways to find debt relief without resorting to loans. This includes community agencies, private charities, debt settlements, etc. Surely the easiest and fastest solution is to ask a friend or family member to help you through this difficult time. It would also be interesting to check if you can also get a salary advance through your employer, as you might be pleasantly surprised.
If you’re having trouble paying off your loans, credit cards, and other bills, it’s a good idea to seek out debt counseling to help you find the best solution for your situation. Payday loans are in most cases a fairly convenient option, so if you do decide to get one, be sure to keep the factors mentioned above in mind and plan the action carefully.