In simple words, a payday loan is an amount you take that has a very high-interest rate implied on it. It is similar to borrowing a certain amount for a short-term period on which the lender will exhibit a very high-interest rate credit that is solely determined based on your income.
People take payday loans because it doesn’t require any collateral that is to be kept.
Despite the interest rates being very high, people still opt for payday loans because it makes their work easy if something is to be taken care of and can’t be kept on hold for longer. Some lenders that give away payday loans are usually found online, but the most common ones are the small credit merchants, the ones who have physical stores in the market that allow onsite credit applications and approval.
Since these loans don’t require any collateral that is to be kept in exchange for the amount lent to them, their ability to pay is also overlooked. Because of this, the extremely high-interest rate comes into play, sometimes making it difficult for the borrowers to repay the money, resulting in them falling into a huge debt trap.
Why should you avoid Payday Loans? And how can you repay them?
This is why payday loans should be prohibited, there have been a lot of rules and regulations, laws in motion, working to settle down for a healthier alternative. Some money lenders have ulterior motives, which involve involving unusual provisions in the official clauses causing them to have authority over the borrower’s properties or other personal commodities through means of cheating and committing fraud.
The basic way of this loan to process is by displaying the payment slips that you get from your employer which show your income thoroughly, after which sometimes, lenders lookout for the borrower’s daily wages to be kept as collateral. The most basic way of fixing the other hand of this deal is to pay off the loan that is lent to you before the next month’s pay, but because of the higher interest rates, some borrowers fail to meet this condition.
The other way around to pay the loan is when the borrower writes a postdated check that includes the full loan amount and the additional fees along with any one of his commodities, when the maturity date arrives the borrower must pay the amount in person. If for some reason the borrower fails to do so, the lender can redeem that postdated check which was handed to him before.
In this case, if the borrower’s account runs short of funds that are to be repaid for the loans, they receive a bounced check penalty, making them guilty for not only paying the loan amount, and the additional interest implied on it, but also the penalty that comes with every bounced check.
This proves to be a very gruesome issue for small-time workers and people who aren’t well-to-do in life, putting them in a vulnerable position. But it is not like you can’t escape this issue ever, there are other ways that you can choose to go with except applying for a Payday loan.
How do I make it out of this without getting a Payday Loan?
Finding the best payday lenders might look like a hectic task to accomplish but it is not impossible. You can look out for lenders that have known you and whom you can trust well. You can read through the terms and conditions proposed in exchange for the loan and you can negotiate to get a better deal.
Some other healthy alternatives include applying for a pawnshop loan, borrowing from a friend or family, having a side-business apart from your main source of income, applying for a bad credit loan, etc.