Six Facts About Payday Loans

Payday loans can be amazing tools though they seem to be the black sheep of the financial market. Truth is that if used correctly they can solve lack of cash problems in emergency situations. That is why it is important to understand their use and known also what kind of misuse can lead to debt accumulation problems. Here are some facts about payday loans that you should be aware of:

Approved Fast Within 24 Hs

Payday loans are so popular because they can provide a fast solution for an emergency. Within 24 Hs. of the application, you will receive approval or denial. In case you are approved, after this period ends, the amount requested will be deposited into your bank account. Thus, you can apply for a payday loan knowing that if approved you will have the money by the next day.
No Collateral At All

Payday loans are unsecured personal loans and thus, there is no collateral required in order to obtain approval. The fact that these loans lack guarantee is one of the factors that turn them into expensive financial products.

No Long Credit Verifications
Also, payday loans do not require credit checks. This means that you credit report won´t be pulled and thus, your credit score and history won´t be considered as requirements for approval. The lack of credit verifications is another reason that turns these loans into expensive financial products but it is also the reason why the money can be delivered so fast.

Fees Rather Than Interest Rate
Maybe due to the fact that these loans are short term loans or maybe because the lenders like to conceal the fact that the interest rates charged are significantly higher than that of other type of loans, these loans feature a fee rather than an interest rate. But don´t be deceived, $10 every $100 lent for a 30 days period implies an interest rate of more than 100% on an annual basis.

Few Requirements For Approval

These loans have little requirements to qualify for them: you will need in order to get approved some sort of proof of income. If you are not employed or are self employed you will need to show copies of tax presentations that show your monthly income. You will also have to show some proof of residence and you will need to have a bank account where to deposit the amount of the loan and eventually withdraw the payment and fee.

Debt Accumulation Issue

Some payday loans offer the possibility to renew them by paying only the fee. This can generate further debt problems because the fees will rise every time you renew the loan and eventually you will not be able to afford the fees. Also, when people resort to payday loans to repay other payday loans, they generate even more debt. These can become an unmanageable problem and thus you need to avoid this kind of misuse of payday loans. Remember: payday loans are meant for solving emergencies and temporary lack of cash problems and they are not to be used as a regular source of financing.
source:http://www.americanchronicle.com/articles/52253