What is a Payday Loan?

You may have recently run into an unexpected expense that you do not have the money for. As you are scrambling trying to look for a potential option to cover this cost, you may have found what is called a payday loan. While this particular loan is quick and easy to obtain and will help you in the short term, these loans can result in even worse financial conditions that will further exacerbate the problem and make it impossible to get ahead. These loans are predatory and require very minimum verification to receive, as they thrive on those in need of money with bad credit or who have no credit at all.

All a payday lender will need to do is verify your income and checking account information, which will then allow them to give the cash to you at their store or deposit the amount into your bank account. If deposited, the lender will then ask for permission to withdraw payment from your bank account on your next payday, as the loan is due immediately. You will also have the option to pay in person, but if you are to miss payment the lender will still have access to the funds through a written check that you provided at the time of pick up. The interest alone on these types of loans can easily outpace the amount of the principal, considering that they could be loaded up with an annual percentage rate (APR) running up to 780%. This is ultimately how those who obtain these loans fall victim to a recurring cycle of struggling to meet payments. Payday loans are often referred to as a predatory form of lending and a debt trap for consumers, as they do not account for a borrower’s ability to repay. These predatory loans can be avoided by building up an emergency fund and preparing for any unexpected expenses, such as medical bills or a car accident. If possible, it is advised to avoid these types of loans at all costs and ensure that you are financially prepared for the unexpected.