Sometimes in life, there are situations that come by that leave you completely unprepared financially. If you have ever found yourself in the situation you already know how scary it can be. One of the options for emergency financing is a payday loan. These loans are offered by vendors to people that are in need of money right now. You do need to be careful though as they can be highly predatory depending on the lender.
What Are Payday Loans
Payday Loans that gives people access to cash immediately. Most of the time you will only be able to take out up to $1000 at a time and they are structured in a way to incentivize paying it back by your next paycheck. Most of the time as long as you can provide proof of your income a payday loan can be deposited to your account in less than an hour. This makes it one of the fastest ways to get emergency money but there are some things to keep an eye out for.
How Do You Payday Loans Work?
There are only a handful of requirements to qualify for one of these types of loans. For the most part, lenders only require that you have adequate proof of income, a bank account, and are of legal age. The amount that one of these loans will cost you depends on your credit score. On average in the payday loan industry people are paying $15 for every $100 they have borrowed. The interest rates can be so high that if you do not pay it off within your next paycheck the overall balance will grow rather than decrease when you are only paying the minimums. These types of loans typically do not have very much of an effect on your credit if you are trying to build it.
For the most part, if you go to a finance professional they will recommend against this type of financing. There are other alternatives out there that can be lower-cost however if you are in the position to consider a payday loan you may already be in a situation where you cannot afford to consider alternatives. If you do need to take out a payday loan it is very important to pay it off as quickly as possible so you can avoid the outrageous interest charges that can accumulate if you are not careful.
Parting Thoughts on Emergency Financing through a Payday Loan
If you find yourself in dire straits financially you should carefully consider the benefits and potential drawbacks of emergency financing. A payday loan may be able to help you out right now but will you be able to pay it back to the end of next week? If not then you may need to try looking for other options because you could end up stuck in a cycle of debt that is impossible to escape from without declaring bankruptcy.