Principles Of Payday Loans Often Misunderstood
View PDF | Print View
by: Donna McPhersons
Total views: 4
Word Count: 354
Payday loans sometimes are completely misunderstood by the business community.In this article I want to clarify some of the very simple and basic principles of the loans and the actual size and duration that these loans.First of all, payday loans are designed for financial emergencies and are short term in duration and small in size. Payday loans normally range from two hundred dollars to two thousand dollars and are usually paid back with the next paycheck or within two weeks. The interest rates are high and the fees are high. If, for example, you borrow two hundred dollars and are required to pay fifty dollars when the loan is due (two weeks) that computes to an APR of six hundred fifty percent which sounds rather outrageous but it needs to be put in perspective. Is a charge of fifty dollars for a two hundred dollar loan fora two week period too high? I suspect if you ask a number of borrowers who are faced with a financial emergency they could well say that, although high, it would be acceptable because they are able to get their cash quickly to solve their problem. Traditional banks will not be able to process the loan on such short notice so payday loans become a good option for many people.
It must be remembered that lenders loan money based upon risk. Payday loans do not run credit checks so credit scores do not impact the loan. Without credit scores traditional banks will not consider a loan because they consider it too risky. It is important to remember that interest rates are based upon risk so the higher the risk the higher the interest rate.
It is the opinion of this author that payday loans fill an important gap within our financial system. If a financial emergency arises and particularly if you have a poor credit score there are not too many options. Payday loans can be a viable option so long as it is paid back on time. It is the responsibility of the payday loan lender to fully disclose the total costs associated with the loan and importance of paying the loan back on time.
About the Author
Source: Principles Of Payday Loans Often Misunderstood
Rating: Not yet rated