Although the global recession is over, people are still struggling to pay their bills. Therefore, it is no surprise that borrowers are turning to payday loans when they experience financial emergencies.
What is a Payday Loan and Why is it So Popular?
A payday loan is a small loan designed to take care of unexpected expenses. These loans are attractive to borrowers as they are quick and easy to obtain. Listed below are some of the characteristics of payday loans.
- The application process is simple and takes less than five minutes to complete.
- Applicants will be approved or declined instantly.
- Anybody who is over 18 and working will be approved for the loan.
- The loan company does not perform credit checks on applicants.
- The loan itself can be paid out within a day or two of the application being approved.
- Payday loans have high interest rates and fees.
Why do People Take Out Payday Loans?
Some people disapprove of payday loan as they have high interest rates. People in this situation often do not know why these rates exist. Payday lenders take on customers that banks and finance companies refuse to work with. As a result, they have a number of “high risk” customers.
The term “high risk” means that the borrower is likely to be late making repayments or miss repayments altogether. Lenders remedy this situation by recovering as much money as possible through the interest that is charged.
Customers take out cash advance loans in spite of high interest rates for the following reasons:
- They cannot get a loan with a bank or finance company due to their low income, bad credit or unstable lifestyle.
- They need fast money. Other loans take days or weeks to process.
- They only need a small amount of money. Banks often have a minimum loan amount on their personal loans.
- The borrower has poor or bad credit.
- Bad credit borrowers want to rebuild their credit rating by taking out a loan and making timely repayments.
For most people, the benefits of cash advance loans outweigh the drawbacks. These loans are usually used for medical expenses, car repairs, new vehicles, overdue bills, school uniforms, groceries and rent.
In the past, people would have to borrow money from friends and family for these types of expenses. This sometimes caused strained relationships. Today, this problem has an easy fix – the payday loan.
How to Take Out a Cash Advance Loan
The simplest way to get this type of loan is search for payday lenders and select a website that offers this product. Once borrowers have made their choice, they can submit an application form.
If the loan is approved, borrowers will be asked to send in the required documentation. In most cases, a bank statement and one form of ID will suffice. The lender will use these documents to verify the identity, age, income and address of the borrower. The loan will then be paid out into the borrower’s bank account. Click here for more information.
If used correctly, cash advance loans can be a lifesaver. Due to their interest rates and fees, these loans should not be taken out on a regular basis. Instead, they should be used for unexpected expenses and paid off as soon as possible.