What Are Payday Loans?
What Are Payday Loans Explained:
Payday loans are personal loans given by a private business which is other than a bank or credit union. These private businesses are normally in business to give private short term loans secured by your employer’s paycheck. The payday loan store will give advance you money and will take a percentage of your paycheck, along with high interest, until the loan amount is paid off. Many payday loan stores will take multiple post dated checks. Interest on payday loans are extremely high, some being as high as 100%. Businesses that offer payday loans normally report the customer’s payment history to all three credit reporting agencies. There are pros and cons to payday loan companies reporting your payment history to all three credit reporting agencies. The pros are that it is an excellent way of re-establishing your credit if you have bad credit so it is super important that you make your timely payments to the payday loan store. The cons are that if you skip a payment or multiple payments or default on your payday loan, it could devastate your credit scores. You need to make sure prior to taking out payday loans that you are able to afford the payments and make sure that you pay your scheduled payments on time.
What Are Payday Loans And Negatives Of Payday Loans
A payday loan borrower can get deeply in debt with payday loans. Since payday loan stores charge extremely high interest rates and high fees, it makes it difficult for the payday loan borrower to pay off the loan and still meet their other monthly debt obligations. It is easy to get multiple payday loans from various payday loan stores which will overwhelm the payday loan borrower in meeting their other monthly debt obligigations. Payday loans should not be used on a continuous basis because there will be no end and eventually the borrower will end up defaulting on all of their loans. For those who have multiple payday loans should restructure their debts and make paying off the payday loans an utmost priority.
What Are Payday Loans And Advantages Of Payday Loans
If had prior bad credit and want to re-establish your credit, getting one payday loan from a payday loan store which report your payment history to all three credit reporting agency, then payday loans may be an excellent way to re-establish your credit. You should start with three secured credit cards and possibly one payday loan and your credit scores should definitely shoot up. Payday loans are reported as installment loans on your credit report and secured credit cards are reported as revolving credit accounts. Having a variety of different types of credit is an excellent way of maximizing your credit scores and re-establishing your credit scores. Again, do not use payday loans on a regular bases. The interest rates will kill you and the only way you should use payday loans is in cases of extreme emergencies and to use it as a tool in re-establishing your credit.
What Are Payday Loans And Cases Where Borrowers Use Payday Loans
As mentioned earlier, payday loans have out of control interest rates and can be compared to getting a personal loan from a loan shark, however, in a legal way. It is also extremely easy to get, even with bad credit. There are cases where a payday loan is necessary and might be worth paying the high interest rates. For example, if you have subzero temperatures and your furnace went out, where are you going to get the money? Maybe a payday loan may come in handy in this case since it is an extenuating circumstance. Money are hard to come by and payday loan stores realize that so that is why they can get away with charge the maximum interest rate legally possible. States monitor the maximum interest rates a payday loan store or pawn shop can charge. Some states have tougher interest rate caps than others.