Payday loans have been dominating the market and are one of the fastest growing business in the financing industry. These types of loans are relatively small in amount that accumulates a high rate of interest. It is often expected to be repaid within the next 20 days or next payday period. These payday loans are often availed to cover shortage on cash for paying monthly dues and expenses. Here are some points we need to understand about payday loans to give us a better understanding of what the loan can offer:
- How Much Loan Can Be Availed?
Payday loans, unlike other loans, are often used to pay for recurring monthly expense or unexpected expenses such as small medical expenses, minor car or home repairs, or even small purchases that cover basic needs. A payday loan is often granted between 10% to as high as 60% of your monthly salary. This means that a big portion of your next month’s salary will already be reserved for the payment of the loan you availed.
- Who Offers Payday Loans?
With payday loans becoming one of the most lucrative businesses in the finance industry, you can find payday loans being offered by lenders from big finance institutions to online financing websites. It is very important that you review and scrutinize the payday lender you will be availing the loan from. This will help you make sure that you avoid payday lenders who scam their borrowers into paying more than what is required by law.
- How Much Interest Do I have to Pay?
Payday loans are known to apply the highest interest rates in the market. Despite the regulation being set by governing institutions and financing companies, the interest rates are often subjected to abuse by some lenders. Some lenders often apply high interest rates as they know that the borrowers who come to them often need the money desperately. Interest for payday loans can have an Annual Percentage Rate (APR) of 300% and can go up to as high as 750%. Getting a payday loan can often lead to more debt especially when the habit of rolling the debt over every month occurs.