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How Payday Loans Works

Payday Loans Works
Payday loans refer to short term loans which you can use to get out of a rough spot. But the truth is that there are very few situations where these loans can be helpful. Before you approach Bamboo loans for a payday loan, it is important that you understand the risks and the cost.

How Does It Work?

In most instances, payday loans are for just a few hundred bucks and you will have to pay it back to Bamboo loans or wherever you take it from, in a few weeks. In order to get a payday loan, you will need to write a check which will be equivalent for the amount you are trying to borrow plus the fee that it will attract. You can leave the check with the lender, who then, will cash it once you are in a position to pay.

If you find it hard to repay your payday loan when it is due, you will have an option of rolling it over so that you extend the loan. It is not a must you repay it then, but remember that the fees will keep on accruing. There are states which have outlawed rollovers or limit the number of times which you can roll over. Before you decide to take a payday loan, you will have to review the laws in the particular state where you live.

There are some payday lenders who market this type of loan as no credit check loan. You don’t need to have a good credit score or even a credit history and getting it approved is quite easy as compared to traditional loans. That is why they have become popular with most people whenever they face financial problems.


Knowing The Cost

On a general note, as compared to traditional loans, payday loans are very expensive. You might find yourself paying an annual percentage rate which will exceed 100 per cent. An example being, borrowing $100 for two weeks might cost you to pay $20 in the fee. If you calculate the APR of such a loan, it amounts to 500%.

The Downside Of Payday Loans

Cost is the main disadvantage of payday loans. Due to the high fees that it attracts, they become a problem instead of helping you to solve a problem. In case you are having persistent financial difficulties, payday loans might just worsen your situation. You will end up paying an extraordinarily high rate in regard to the interest which means that, your expenses will go up. Using it as a short term strategy once or twice in a decade is acceptable. But as a long term strategy, you will be pulled under by payday loans.

In case things don’t work out well, you might find yourself in serious trouble. If you write checks that end up bouncing might cost you overdraft charges by your bank. After that, retailers and banks might not be willing to work with you which will then complicate your life further instead of solving your problems.

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