For almost any product or service there are always people who are for or against it. This is especially true in regards to services that involve your finances. We should be apprehensive when it involves the money that we need to live, but it is also important to be well informed.
There are a growing number of people who look down on what are called payday loans, personal loans, cash advances, or payday advances. The far reaching majority of those who feel this way have never used a payday loan, never talked to a payday loan lender and never looked into how payday loans are administered and paid back.
This article is focused on describing what these personal loans really are, so that we can be an informed public. It will also explain what the advantages for taking out a cash advance can be for those who do.
These payday loan lenders are often viewed by the public as greedy loan sharks who create impossible plans from whence the needy are ruthlessly taken advantage of, through complicated payment programs and small print terms. That is not the case with payday loan advances.
When anyone takes out a payday loan, all terms of the loan are clear and not confusing. Like any business, the lenders want to make money (I hope this does not surprise anyone.) Unlike banks and credit unions that are lending out thousand to tens of thousands of dollar loans, these lenders are dealing with short term loans.
What does this mean? It means that in order to exist, payday loans have to have a higher APR than banks and Credit Unions. Those lenders only ask 7 to 10% APR, but their loans last years. They can afford to do that. If a cash advance lender was to try and go with low APR like that they would go out of business.
The small size of the loans at a payday loan lender would give revenue of $0.50 to $1.00. No cash advance lender can produce enough traffic to stay afloat on that small of an exchange. It would make no sense for them.
The cost is still not extravagant, but is high on an APR scale. The important thing to remember is that these short-term loans are not meant to be paid off over the course of a year.
They are meant to be paid off by the next pay check or two. That means that whoever takes out the loan is usually paying back $10 to $50 dollars, which should be very doable or that person should not be taking out the loan to begin with.
It is not the goal of the cash advance lenders to keep those with loans perpetually on a payment program. In fact, it would be much more preferable for those who have taken out a payday loan to pay it off in the time they are supposed to. That way the lender knows that they will be getting back their money in full, which often ends up not happening.
The problem, with very few exceptions, is that people just borrow more than they should have to begin with. That cannot be helped by payday loan lenders, who can't know that up front.
The truth is these lenders provide a service that would otherwise be unavailable. If people need small amounts of money for bills, food or anything else, they cannot just go to a bank for these things. Payday lenders don't differentiate between those who want a loan and they will give a loan to anyone despite credit.
By all means look into this business more before judging it too harshly. You might be surprised that when you need a short-term loan all you have to do is go to one of these lenders and you will find all the service you hoped for.
