Are Payday Loans a Hindrance or Help?
A Small Loan with No Credit-Check, Bad Credit Not a Problem
Jul 10, 2009
Struggling families are increasingly desperate to find ways to balance their finances at month end. Missed and late payments may mean that traditional ways to borrow money may not be available. This is because defaulting on the terms of an agreement means a bad credit rating. The growing number of consumers with adverse credit has led to a growth in the popularity of the no credit-check Payday loan, despite the usury rate of interest charged to hard-up borrowers.
What is a No Credit-Check Payday Loan?
A Payday loan is a cash advance or short term loan that lasts for anywhere between a few days and a full calendar month. It can be taken out for any purpose, including paying the mortgage, buying a car or going on holiday. Choosing to borrow money for any longer isn't plausible due to the high interest rate. Loans are typically available for between $50 and $500. They are a small loan and not suitable for debt consolidation purposes.
Payday Loan Eligibility and Requirements
Whilst this no credit-check loan is suitable for those with a bad credit rating, the borrower will need to meet all the necessary criteria.
- A U.S. citizen.
- At least 18 years of age.
- 2 forms of identification, including at least one form of photo ID.
- A full-time job.
- A valid checking account.
The Cost of Payday Loans
In order to take out a Payday loan, the borrower will need to provide the lender with a postdated check for the loan amount plus a fee; this is typically 15% of the amount borrowed. According to an article in the LA Times "A $255 loan typically carries a $45 fee from a payday lender; if the same amount were charged to a credit card and paid off a month later, the cost would be about $4." The short term loan is cleared when the lender cashes the check shortly after the customer receives their monthly pay. The rate of APR is typically 300-400%.
A no credit-check Payday loan is a viable way to borrow money for those who have a bad credit rating. It can help individuals who have an urgent financial problem, such as paying the rent or mortgage. Try to avoid a short term loan for a foreign holiday or impulse buy. There is also a danger that a consumer will fall into the dependency cycle trap. The majority of business comes from repeat custom. Consider the pros and cons of a Payday loan before signing-up.
Sources
(June 24, 2009). "Consumers may pay the price for a fault Payday loan measure." The Los Angeles Times.
Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.
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