A payday loan is small, shorter-term type of unsecured loan that is linked to the borrowers’ paycheck. Another name for these kinds of loans is a payday advance. One of the problems with payday loan companies is that they also have aggressive advertising and collection practices to bring borrowers in when they don’t really know all of the details.
Many people turn to payday loans because they have a low income or few assets, and therefore are not able to secure a regular, lower interest rate loan from a bank. Payday loans rely on the borrower to have previous payroll and employment records. These loans have a substantial risk to the lender with extremely high interest rates – borrowing just $100 could take months or years to pay off and end up costing you thousands of dollars.
In many cases, borrowers must write a posted dated cheque to the lender for the amount they wish to borrow, plus any fees involved with the loan. The lender will then give you the cash or deposit the loan into your bank account.
This then begins the vicious cycle that is difficult to stop. Borrows may not understand that the high interest rates are likely to trap them in a cycle of debt in which they have to repeatedly renew the loans and pay associated roll-over fees every two weeks or until they can save enough to pay off the principal and pay off what they owe to the payday loan company.
Other short-term financial options are available to most people who would normally turn to payday loans. Fast Access Finance has a variety of loans for people who have bad credit or no credit history. An unsecured personal loan, home equity loan, or car title loan might be a better option for you to avoid falling into the cycle of payday loans.
Remember, a payday loan should be avoided at all costs because you have other options. Contact Fast Access Finance today to discuss your options.