Saturday, May 5, 2012

Why are Payday Loans Becoming so Popular?

In today's economy, it seems harder and harder for people to pay their bills on time, pay off their mortgage and get out of debt. The news is full of companies requiring bailouts, reporting reduced profits and going out of business altogether. Is it any wonder payday loans companies are gaining popularity?

Payday loans help people who need a short term advancement of funds until their next pay. Usually the funds are fairly small amounts, up to 00 or so. It's important to understand that the loan is only until your next pay comes; you may have to give the company a post-dated cheque, and if that bounces there could be heavy penalties or fees. Make sure the amount that do you borrow can be covered with your pay.

It is easy to qualify for payday loans. Generally, as long as you are employed full time and make more than 00.00 per month you can get approved. Certain companies may have more stringent criteria: they may ask for a bank statement for proof of employment, and to make sure you have not had any NSF fees in the past 3 or 6 months.

Many payday loans companies will deposit the funds right into your bank account, making it convenient and stress-free. The funds are usually deposited a few hours after being approved.

If you work on a commission basis, are self-employed or on social assistance, you will probably have a harder time applying and being accepted. The payday loans companies want to make sure they get their money back, so this is for their protection.

Keep in mind that you will pay a higher price for these payday loans. The interest rate can be quite steep, much more than a traditional bank loan. Most are approximately the same as credit card rates. Unlike a credit card though, the entire amount is paid back in a short amount of time, so the interest does not accrue.

Do your research before doing business with just any company. Know exactly what their terms are and what their interest rate is. Don't sign anything before understanding the fine print in the contract.

If you find yourself running out of money before your next pay on a regular basis, it may be time to find a better paying job, or overhaul your budget. Perhaps you are spending too much on eating out, or buying too many expensive lattes in the morning on the way to work. When considering your budget, don't forget expenses like health, car and term life insurance premiums. Payday loans should certainly only be used as a last resort but always be prepared to read all of your fine print because despite what financial hardships you face, owing money to a company that charges ridiculous interest rates can only worsen your scenario.

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