The Truth About Payday Loans

Payday Loans are a "controversial" form of subprime lending. Many people argue against payday loans calling it "predatory lending" and making false claims that payday loan companies take advantage of poorer communities. Nonetheless, payday loans are not quite the horror story they have been made out to be. The truth about payday loans is that they have come through and provided urgently need cash in the nick of time to borrowers. While no one enjoys being in the position of having to borrow money, the reality of the world is sometimes we will find ourselves in a financial bind. Payday loans provide a much needed life line to those who have found themselves against a wall without another means to fast cash.

Unlike traditional loans, payday loans are a form of subprime lending. For definitions sake, subprime lending is a loan source for those "who do not qualify for the best market interest rates because of their deficient credit history." Payday loans have helped many individuals with less than perfect credit get the money they need when they are unable to qualify for other lines of credit. Payday loans do not require a credit check to qualify for an approved status making them much easier to obtain. Taking out a payday loan to cover an unexpected emergency, pay late bills, or any other urgent matter can save borrowers money while preserving their credit score from taking any further hits.

Another truth about payday loans is that the interest rates are commonly misrepresented. Oftentimes potential borrowers will be discouraged from taking out a cash advance or payday because they see interest rate percentages in the triple digits. The reality, however, is that payday loans are only meant to be taken out on average for a period of two weeks or whenever your next pay check arrives rather than on a yearly basis. Payday loan regulations vary between states; if you are considering taking out a cash advance, it would be in your best interest to review your local and state laws regarding payday loans. While some states ban payday loans entirely, the majority of states that allow payday loans abide by regulations to protect consumers from exorbitant interest rates and "debt traps" often associated with payday loans.

Generally speaking, it is easy to find and be approved for an online payday loan. A borrower must simply complete the online application and submit his or her information for review. Based on the details provided, a representative will match the potential borrower with the best lender based on the individual's needs. For payday loans in the United States, borrowers must meet the following general requirements to qualify: be 18 years of age or older; be a citizen of the United States; be currently employed and earning a minimum dollar amount per month; have a checking or savings account that allows direct deposit. Just as the payday loan is deposited directly into the account once the borrower has been approved and accepted the lender's terms of agreement, the payday loan is automatically withdrawn on the borrower's next scheduled pay date.