Payday loan is basically a short-term loan (usually for period of 2 weeks) used to cover shortage of cash due to unexpected expenses. The loan amount is not large; usually limited to $1,500 but it's a lot less in most cases. There are pros and cons in payday loans that you need to be aware of.
The main benefit of a payday loan is
fast approval. For example, you could just spend few minutes fill out an application form online and get approved the next business day. The lender doesn't check your credit record; what they need are your personal information, account information and source of income. No other form of credit can be approved that fast.
However, before you rush off to get a payday loan, make certain that you can afford to pay back your loan in the specified timeframe (as mentioned, it's usually 2 weeks; sometimes up to 4 weeks).
A word of warning: NEVER ask for loan extension. Because the interest for extension is unreasonable high; it can reach up to 300%. You may be shocked to hear this but it's true. This is because there are no regulations regarding the amount of interest charged on
payday loans when they are extended. So please be aware of this.
For example, if you borrow $200 for two weeks; the finance fee is usually around $25; which is about $50 in this case. So you must make sure that you can pay back $250 in two weeks. The lender will need you to write a postdated check. If you can't pay back that loan in two weeks; the lender will be more than happy to extend the loan for you. This is where you could fall into an unreasonable high interest charges. If you extend your loan for more than three months for instance, your debt could become $600.
As you can see from the example above, it's a bad idea to borrow and extend a payday loan for several months as you will unreasonable high interest. As mentioned, payday loan is a short-term loan and has never been designed to use for more than one month. If you need loans that span for several months, find a better long term credit. For example, credit card or personal loans are better option; their rates are much smaller than payday loans.
Source:
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