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Tags: finance, payday loans, higher payday loan rates
 Paydays loans are very popular especially in times of financial emergencies. Most people who instantly need money can go to the nearest lending institution and file their application for a loan. Basically this type of loan is commonly availed by people who can’t anymore wait for their next paycheck to arrive due to a pressing need.
Well, if you’re living paycheck to paycheck, you’ll probably need this one when emergencies arise. If ever you’ll apply, the number one factor that you must consider in the said loan is the interest rate. Lending companies generally charge higher payday loan rates. Why is that so? It’s because the said loan is only good for about two to four weeks.
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From the title itself, we can infer that you will have to pay until your next payday comes thus you are obligated to pay in a shorter period of time. Moreover payday loan rates are higher than other types of loans because lenders want to gain profit from the borrowers even in a short duration.
Remember that the interest is computed annually. Longer duration means more income for the lenders. Actually, the best thing about payday loans is the ease in the application process. You can have your application approved in as fast as one hour. Yes, believe me! That’s why it’s sometimes called instant loans.
In applying, you only have to provide information such as name, address and your employment status like your monthly income and your position. There are no credit check procedures in here and that’s another factor which led lenders to charge too high payday loan rates. There may be times when borrowers will not pay on the agreed date or to some extent never pay at all.
What lenders will do is to pass on to other borrowers the burden by offering high payday loan rates. You should very well understand the payday loan rates so as to determine whether it’s really advantageous to obtain loans. Just bear in mind the interest you will be paying. That’s why some people are very hesitant in getting this type of loan for the interest can really be unreasonable.
However, if you will encounter financial difficulties at the most unexpected time, applying for it can be a good option. You will be able to solve your immediate money problem but you should be prepared for the consequences. It will be in the form of higher payday loan rates. Even though you will pay your obligation on time, you will still be paying for the principal plus the interest.
The interest rate is actually in terms of APR or Annual Percentage Rate. That means the rate is computed for a year. In this case, you will be paying for a small portion for the entire duration is for a couple of weeks only. However, the interest is still higher compared to other loans.
That’s why; as much as possible, do away with payday loans. You can combat financial emergencies by putting up a savings account. If you don’t have one, better start now.
About the author
The author of this article Rick Goldfeller is a successful underground Financial Analyst who has been advising and coaching individuals for many years. Rick recently published a book on how to manage your money and attract Wealth and Financial Freedom. More info on his Finance Planning course is available HERE.
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