We’ve all seen the late night commercials for an online payday loan. What is a payday loan, and what is the advantage of getting it online?
What is a payday loan?
A payday loan is simply a loan that will tide you over until you get your next paycheck. These are useful in emergencies, such as car accidents or medical expenses. There are tons of companies that will give you these short term loans. Keep in mind that online payday loans will usually have extremely high interest rates. They have high interest rates, because, well, they can! The companies giving out payday loans know that their customers are desperate – they play on this desperation.
What are the restrictions?
Luckily, even if your credit is god awful, you can usually get a small payday loan. Since they are for under $1,000 and the interest is so high, lenders are willing to risk more. As long as you can prove you have a job and that you need the money, you can usually get a loan.
The main restrictions come from the government. Most governments do not allow payday loans to exceed $1,500. In addition to this, they put restrictions on the amount of interest that these short term loans can come with. Why?
It’s easy to prey on people when they are desperate. Usually, you’re desperate if you are willing to take out a payday loan with ridiculously high interest. These restrictions can prevent banks from preying on you and taking all of your money.
What are online payday loans?
The internet improves almost everything in our lives, and finances are no exception. It’s very easy to get an online payday loan because you can do everything online. Banks will set up a website. From there, you can sign up with your personal information. After the basic information, you enter the finances you need, such as credit score, the amount you need loaned, and when you can pay the loan back.
Some websites will still encourage you to call them and touch base, but since payday loans are so low in terms of money (mortgages can get up to $5,000,000 whereas payday loans are usually around $800), banks don’t need to do that much customer service. They know people will pay them back because of the huge interest rates.
Should I get a payday loan?
Payday loans shouldn’t be taken out on a whim. While they’re easy to get, they’re hard to pay back. The interest can easily have you paying an extra 1/3 on top of what you took out originally. This means that you shouldn’t take out the loans for pleasure, such as so you can go out and drink one night.
On the other hand, there are lots of situations that warrant a payday loan. If you get into a car accident and need surgery, it’s definitely worth it to take out the payday loan. While you shouldn’t be spending money unnecessarily, sometimes it’s necessary. Life throws curveballs – a payday loan can be your designated hitter!