A payday loan is a quick way to get a small amount of money. This is a short-term loan that lives up to its name. You won't be able to borrow more than $1,000 using a payday loan, and you won't be able to pay it off for several months. Often, the payday loan repayment period is 14 days or one month.
Payday lenders receive payment on the loan on your next payday or the next day after that. This usually happens automatically if you allow the lender to debit your checking account.
In fact, everything is easy and simple with a payday loan: you borrow a small amount and return it after 14 days. However, there is one catch. And this catch is called interest rates.
Payday loan interest rates are incredibly high. For example, a payday loan for 14 days with a $15 commission for every $100 will match the annual rate of 400%. It's not that noticeable because the amount you're borrowing is small. But a fact is a fact.
In fact, payday loans are neither good nor bad. They are expensive. But they also have their advantages.
For example, a payday loan is almost always fast. Perhaps you will not receive any other loan on the day your application is approved or, at most, on the next business day. In addition, this is one of the few options for people with bad credit to get fast money. This is because private lenders look at your income level but not your credit history. Another positive aspect of a payday loan is that it does not affect the credit rating in any way, and checks do not reduce the credit score.
The main problem with payday loans is their interest rates. So you need to be very careful and calculate your budget in the same way, to be sure of repaying the loan.
Note that payday loans are banned in 17 states. Other 18 states and Washington, D.C., have set an interest rate cap of 36% for short-term loans.