The American dream is one of the most popular dreams in our country, and many people aspire to live it someday. Unfortunately, for some unlucky individuals, their dreams have turned into nightmares. The nightmare that many people face when they are faced with financial difficulty is getting the best paydayloan. They have become a rule rather than an exception, as millions upon millions of Americans depend on them for short-term finances every month. In fact, about 50 percent of US residents apply for a payday or title lender at least once a year. That’s right, more than half of all Americans who need money to meet immediate needs turn to these lenders. But why? What makes these best payday loans different from other types of loans we take out from banks? And what can you do to make sure you’re not among those who get stuck in this situation?
Types of Payday Loans
To understand how best payday loans work, we first must look at the different kinds of loans available in the market today. There are three main types of payday loans: installment loans, signature loans and paycheck advances. All three are designed to provide short-term cash to a borrower. However, there are some key differences between each type of loan, which could affect your decision on which option is best for your specific situation. To determine which kind of loan is best for you, here are some things to consider:
- How much time will you need the funds? Will you be able to pay back the loan within the timeframe set by the lender? If so, then installment loans may be a good choice for you. If not, then you might want to consider a signature loan.
- How much money are you borrowing? If you plan to borrow less than $500, then installment loans are probably the best choice for you. If you plan to borrow over $500, then a signature loan would be better suited.
- Do you have any credit problems? If you’ve had bad credit in the past, then a payday loan is probably not for you. You should instead try to fix your credit before applying for a loan.
- Are you comfortable using a third party? If you feel uncomfortable giving personal information to a stranger, then you should avoid signing up for a payday loan. Signature loans work best if you don’t mind sharing a bit of information about yourself.
What Is A Payday Loan?
A payday loan is a small dollar loan that allows you to borrow up to $1,000 in one lump sum. It is usually paid back in installments over 30 days (or less). The interest rates on these loans typically range from 400% to 675%. Once you repay the principal amount, you receive your next paycheck. The repayment can be done through direct deposit or paper check and it is normally due within 15 days of receiving the paycheck.
Why People Get Into Debt With These Loans
Although payday loans are used by millions of Americans every year, they are still very controversial. Many politicians believe that they encourage risky behavior and lead to long-term debt, but studies indicate otherwise. For example, researchers found that the borrowers were actually making payments on average twice faster than those who took out a traditional loan. This is because payday loans require no collateral and offer fast approval times. Moreover, they allow you to borrow only what is needed, which reduces stress.
When taken responsibly, however, a payday loan can help many people. For instance, someone facing an unexpected car repair or medical emergency can use a payday loan to cover expenses until the repairs or treatment is complete. Another common reason for taking out payday loans is to cover everyday living costs while waiting for a job. These loans also can prevent you from having to cut back on food, gas, rent, utilities, etc., which often happens during hard economic times.
How to Avoid Getting Stuck With a Payday Loan
If you decide that applying for a payday loan is right for you, here are some tips to keep in mind to ensure you won’t end up in debt. First, remember that you’ll need to find a reputable company that offers quick approval and competitive interest rates. Don’t give out too much personal info to the company representatives. Also, make sure they ask for a copy of your last two pay stubs and your driver’s license, and verify your employment status.
Next, don’t fall into the trap of thinking that you need a payday loan just because you have a low credit score. While the credit scores of most payday loan applicants are very low, there is no evidence that payday lending leads to lower credit scores. In fact, several studies show that people who take out payday loans tend to improve their credit scores after taking out the loan.
Finally, never borrow more than you can afford to pay back. Always pay off the loan as soon as possible. Not doing so means you’ll continue to accrue interest charges, which could add up to thousands of dollars in additional fees.
Things to keep in mind
There are certain harsh decisions made during a payday by Americans like applying for huge loans with high rates of interest and giving them valuable information like all bank accounts all houses cars and properties and industries even in their names which when they couldn’t pay and land in trouble which is no short of a nightmare to lose everything suddenly.
There are plenty of reasons why Americans turn to payday loans every day. Unfortunately, payday loans aren’t always the answer. Instead, think carefully before applying for one, and always follow the rules when taking out a loan. Remember that payday loans are meant to be temporary solutions to short-term financial emergencies. Before using one, you should have a clear idea of how you’re going to pay it back and how much money you’ll need to borrow. If you do choose to take out a payday loan, make sure you understand exactly what you’re agreeing to.