Understanding Payday Loans

Payday loans are a loan in which you promise to pay back the amount you borrowed by your next payday. It is a short term loan in other words. The payday loans are seen as a modern way to get cash advanced to you when you are struggling between pay cheques to pay your bills on time. It used to be that employers would allow for a little advanced payment on your pay check and that amount would be deducted from the next pay check. The idea was to help you out in an emergency situation. Since more and more businesses are getting away from the mom and pop places and becoming corporations it is hard for cash advances to be made. This means that something like the payday loan companies needed to fill that need. There are some good and bad aspects to the payday loans you should be aware of before obtaining one.

First it is a lot easier to get a pay day loan even when you have bad credit. It is a very quick process as well. The bad areas you should be concerned about are the small amounts. You are only able to get up to 1000 pounds in a payday loan. This may not be helpful if you have a larger emergency. It also doesn’t have any bearing on your credit rating. So if you have bad credit you can’t use the loan to increase your credit scores.

The worst thing about these payday loans is the interest charges. There is an extremely high interest charge and fines if you don’t pay the amount back on time. In fact you could be paying twice the amount of the loan to the company. The repayment time is short. Rather than making monthly payments like you would on other loans you have at most two weeks to pay the full amount back.

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Understanding Payday Loans