Payday Loans
Payday loans are short term loans given by companies that specialize in giving loans for a short duration. Payday loans are also called cash advance loans or quick cash loans. A payday loan is for someone who urgently needs a few hundred for a few days. Usually the companies specializing in payday loans lend money ranging from $100 to $500 and the money has to be repaid in two weeks.
When going for payday loans, the borrower has to give the lender a postdated check for the loan amount plus the fees. The fees for payday loans vary from $10 to $30 on every $100 that is borrowed.
If for some reason the borrower is unable to repay the money, the debt gets rolled over for another two weeks provided the borrower pays all the associated fees. Some states in the US have a limit to the number of times a payday loan can be rolled over while in other states, payday loans can roll over indefinitely.
There is a lot of opinion on payday loans. Proponents of payday loans feel that these loans provide a service which otherwise is not given by banks and financial institutes – they offer short term funding for people who need them. It is also said that payday loans are taken by people who would not be eligible for loans given by conventional banks and financial institutes.
The detractors insist that payday loan companies often target low income communities and take advantage of these borrowers by charging very high fees so that they are always in debt. There are 13 states in the US that do not legally allow payday loans to be disbursed to borrowers.
Payday loan can be useful if the borrower needs urgent money for a couple of days and is sure of having the means to repay the loan. On the other hand, if the loan is constantly rolled over, it can be quite expensive for the borrower and under adverse circumstances, he might not be able to repay and get burdened by it for the rest of his life.
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