A payday loan business is a lending institution that takes on high risk loans. In fact, they don’t even check your credit rating before handing over money. The only thing they ask for is that you are employed (and can prove it) and that you have a bank account. They are used by people for very short-term loans (usually a week or so) and are handy for individuals who find themselves in financial difficulty and in need of money between paychecks.
You should be aware that this is the highest interest rate of any line of credit. In fact, you may end up paying an interest rate of up to 700% per year!
So who would need such a service? Well, if you are working and don’t have any other means of covering emergency situations (for example, you have no credit cards or overdraft protection), you may be forced to take out a temporary loan to cover your needs.
The real problem with most users is that once they start doing this, they can’t stop and they are always just one paycheck behind.
Things can get bad very fast for anyone in this situation. Miss just one payment and the interest doubles. In some cases, that could be enough to put someone on the street.
Of course, one of the best ways to avoid this kind of stress in your life is to avoid using them all together. Though they may be able to solve your short-term financial woes, they could easily end up taking a little of your hard earned paycheck each week if you are unable to get off the merry-go-round.
Unfortunately, not everyone has a choice and they will continue to thrive as long as there are people with real emergencies who are living paycheck to paycheck. Perhaps what is really needed is tougher government regulations that make it a little more fair for all parties involved.Tags: loans, payday, service, short-term loans