If you are worried that you may not have easy access to loans and money because of your poor credit history, then the good news is that you have the option to go for Payday loans. Because of the high fee and high-interest rates associated with payday loans, they have become an extremely popular and sometimes profitable business opportunity for lenders. They are easily available through small companies, offices, banks, and other financial institutions. A lot of companies have also started giving payday loans online without any documentation. If you have a valid checking account, then browse around here ‘I would not get a payday loan near me’ is not a cause of concern for you anymore.
Understanding a Payday loan
A payday loan is an ultra-short-term loan that is usually given for any period less than 1 year and is usually given to people with a bad credit score. This is because people who have a good credit score would rather go for cheaper alternatives like credit cards or secured loans. Payday loans are very cost heavy for a borrower and are associated with a high risk of default as well.
The amount of money that is given as a payday loan is determined by various factors such as the income level of the borrower, checking account balance, reputation, and of course, the credit score. The time taken in disbursing a payday loan is also not much because of the minimal documentation required. Thus, it is one of the quickest ways (though not the best) to get money for an immediate financial need or crisis.
The wide reach of payday loans
The payday loan industry is not very regulated, and thus the guidelines to be followed by the lenders are very simple and comfortable. This is a big incentive for the lenders to offer payday loans because unless there is a default, they end up making a lot of money in a very short period. As a result, you will find a number of lenders online and in your neighborhood who are willing to give these loans, and easy payday loans near me is not a problem at all.
Due to the ease of availability of these loans, people with a bad credit score have been majorly incentivized. People do not need to bother about working on improving their credit score anymore, and can easily approach any of the payday loan lenders to get some quick money and overcome their financial instability. This exercise has become habit-forming, and this can be a cause of distress for people in the long run.
Banks or smaller companies?
Earlier, only small financial companies were in the business of giving payday loans, but now even banks have ventured into this space. Some people misconstrue the payday loans given by banks to be safer and more reliable, just because earlier banks used to provide loans only after all due checks were done and only to people with a good credit score.
It is essential to understand that payday loans taken by banks can be worse than those taken from smaller companies. This is because the borrower’s checking account is with the bank, and this gives the bank control over the borrower’s transactions. They can apply restrictions and limits on the withdrawal of funds, and can sometimes even automatically withdraw money from the borrowers account in case of a default. Thus, borrowing from a smaller company gives a borrower more control over his cash flow and money in hand.
On the contrary, smaller companies and offices do not follow as many guidelines and regulations as banks do. As a result, they can charge any amount of upfront fee and interest rate from the borrower, and can also set their own rules of loan disbursal. A bank, on the other hand, is a more stable financial institution and is regulated by a Central Bank that monitors all its transactions. Thus, it is not as easy for banks to charge exorbitantly to the borrowers.
Though payday loans are readily available nowadays both online as well as brick and mortar institutions, they should not be considered as an easy alternative to safer and more feasible avenues of having money. Proper financial planning and regular small savings can also go a long way in not having the need to borrow and not getting trapped in the cycle of borrowing and re-borrowing.