Payday loans are short term loans that are usually due on the next payday. Most lenders are small groups who target the average wage earners who fall short on their salaries to pay for their monthly expenses. Payday loans are unsecured loans which carry a high percentage of interest rates. As much as possible, we need to limit in getting this type of loan due to its high rate of interest. To help you further understand, here are some cases why people try to get a payday loan.
- Instant Cash for what you need – this is the easiest loan to get especially if the amount is small and is expected to be paid within a short period of time, usually by next payday. Unlike other forms of loan, this no longer goes through a thorough evaluation of the borrower. It’s the easiest loan to get that is unsecured.
- Debt Payment – for people who are struggling with making ends meet and fulfilling payment responsibilities, a payday loan can usually help one get by. An example of this would be getting a payday loan with a cost of earning interest until the next payday rather than missing a payment for your credit card which may become due in its entirety if not paid. The cost of securing a payday loan may prove to be lesser than missing the minimum payment due.
- Liquidity – there are cases where the borrower has sufficient resources. But due to resources being less liquid, a payday loan can be used to fulfill an immediate need. It is possible that the cost of getting a payday loan would prove less rather than to be liquidating investments and other assets for the need of cash.
- Alternative Loan – getting a payday loan can be an alternative if the borrower was not approved for a different type of loan. A payday loan is easier to secure but usually carries a higher interest rate with it. It does not require any collateral which becomes less complexity on being granted one.
Payday loans are one of the ones you get when your need is on a short term. Having a payday loan not only provides immediate need for cash but also less complexity in applying for one.