Quick Cash with a CatchOn December 6, 2019 by
Payday loans are very short-term loans that are usually repaid within two to four weeks. These loans differ from standard loans due to their short duration and the fact that a credit score check is never needed. Instead, the lender requires the loan applicant to write a post-dated check for the amount borrowed plus interest to be deposited in the lender’s account on the agreed upon date or when the borrower’s paycheck is deposited in their account. Thanks to this, the borrower need only provide a pay stub to prove their ability to repay the amount and a bank account for the lender to retrieve their debt from.
Once restricted to brick and mortar locations, loans are becoming more and more common on the internet. This new aspect of the way lenders can reach out to borrowers has caused the once niche market of these very short-term loans to explode in popularity as of late. Some even offering apps and recurring arrangements to supply borrowers with their full paycheck amount, plus interest of course, at the push of a button. Or, in some cases, no input from the borrower at all.
Payday loans are a good way for lower income individuals to acquire quick funds if they are going to run out before their next payday. However, these loans come with a very high interest rate, deemed predatory in some localities. As a matter of fact, these loans are only legal in 32 states, with some states planning to let the current laws sunset, setting a deadline for loan companies to operate before no longer allowing it in the state. Other restrictions placed on these loans include the amount of the borrower’s paycheck they can borrow against with some limiting the amount to only 25%.
On the subject of state laws, the interest rate being charged is usually determined by these, with most states capping out at 15%, but some climbing all the way to 30%. These high interest rates coupled with the very short term of the loan have made these loans one of the most expensive ways to borrow money. The loan will have no positive effect on the credit score of the borrower. Instead, if somehow they are unable to repay the loan, it can only hurt their score. With credit card interest the same, if not lower than the interest rate of these loans, there don’t seem to be many positive aspects.
In conclusion, though payday loans are an easy way to get an advance on your next paycheck, the costs associated with it may not be worth it in the end.