What Are Payday Loans and How Do They Work?

Do you need some quick financial help to get yourself out of a whole? Are you waiting on your paycheck to come in, but payday is still a week away?

If so, then we might just have the perfect solution for you: a payday loan.

A payday loan can afford you a simple, quick way to eliminate a small debt while you’re waiting on payday to come around. In this article, we’ll explain the answers to the questions of what are payday loans and how do they work.

What Are Payday Loans?

The concept of a payday loan is very simple. With a payday loan, you could get a small chunk of cash (usually no more than $1000) that you can use to finance whatever debt or payment you need to get rid of immediately.

For instance, many folks might turn to fast day pay loans to get them through the week if they don’t have enough cash for groceries until payday rolls around.

The reason why this type of loan is called a payday loan is that it uses your paystubs as a guarantor of your ability to pay the loan back. Typically, the loan repayment date will be extremely short-term — you’ll be asked to pay it back as soon as the next day that your paycheck comes in.

The interest on a payday loan isn’t typically very significant if you pay it off as soon as you can. However, if you let it compound over time, then you’ll find that the interest rate on a payday loan can be over 100% APR!

Should You Use a Payday Loan?

There are both pros and cons to leveraging a payday loan to make a payment on something you need in the short-term. On the pro side, a payday loan takes very little time to complete. Some payday loan providers can offer direct financing that gets deposited in your bank account in as little as a few minutes — check it out.

Another big perk is that some payday loan vendors won’t run your credit. If you don’t have a credit score, this could be a boon for you as other loan options may not grant you a loan. Instead, payday loans use your prior income history as surety for your payment.

However, it is important to keep the high APR of a payday loan in mind. If you aren’t. going to be able to pay it back immediately, then you are going to pay a premium for access to that short-term capital.

Thus, you should only use a payday loan in instances where you really need the cash for a material need in the short-term and are confident of being able to pay it back within a very short time frame.

Get a Payday Loan Today

Now that you know what are payday loans, i you think a payday loan matches up well to your financing needs, then you should try getting a payday loan today!

For more financial advice, check out the rest of the articles on the website before you leave!