Cracking the facts
How does a payday loan work?
Do you need fast cash? Do you want a quick fix for that financial emergency but didn’t take the time to save money for a rainy day?
How does a payday loan work?
Do you need fast cash? Do you want a quick fix for that financial emergency but didn’t take the time to save money for a rainy day?
How does a payday loan work?
If you’re like millions of other Aussies who found themselves strapped for cash, you may think that taking a payday loan is the solution to your problem.
Keep on watching to learn what is a payday loan and why you should think carefully before applying for one.
A payday loan is an unsecured, high-interest loan with a short repayment period. Borrowers are usually required to make repayments when they receive their salary on their payday, hence the term “payday loan”.
As mentioned, people who take out payday loans are those who have immediate need of cash or are facing financial hardship. While most payday loan borrowers have a regular income, they usually turn to credit to cover short-term unexpected expenses (medical emergency, home renovations due to bad weather etc) that their budget didn’t account for.
How does a payday loan work?
One main advantage of payday loans is their convenience. You can apply for a payday loan online and the turnaround time can be as short as 24 hours. Payday loan loans are also popular due to the flexible lending criteria of its lenders. Borrowers with low credit ratings, poor credit histories and people with low incomes can apply for a payday loan as long as they can prove they will be able to repay their debt.
However, this convenience comes at a high price. Payday loans are infamous for charging borrowers high annual interest rates and fees. Another risk of payday loans is its potential to be a debt trap. If you are not able to make repayments on payday, you are allowed to extend the loan for another period. You will continue to spend borrowed money and accrue late fees that will keep piling up, which can only make your financial situation more problematic. Read more about the potential dangers associated with payday loans.
Payday loans can be difficult to repay and could end up costing you a lot more than you borrowed if you are not careful. So, make sure to check out your other options before you take out one.
To get all the relevant news and guides about applying for payday loans and understanding the cost and risks that come with it, explore nestegg now.
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