Payday loans are short term loans that are easy to get and many times imperceptibly, because payday loan lenders use to advertise these type of loans as a quick money solution to pay your bills or to cover the expenses of an emergency case that may arise before your payday. However, it is necessary that you understand how payday loans work to avoid getting into a vicious debt cycle, which is truly hard to break.
Truth about Payday Loans
As noted above, payday loans are short term loans by means of which you can borrow a small amount of money. This means that you can get from $50 and up to $1, 500 with ease or at least is what payday loan lenders make you believe. First off, payday loans are cash advance loans that you are borrowing from your own paycheck, being the reason why credit history is not a determining factor to get your application approved. However, only employed people can get a payday loan and the maximum amount that an individual can borrow depends on state law and his or her net income, thus employment verification is usually involved.
Less Money Than You Expect
Bearing in mind that payday loan lenders have to abide by state law and regulation, when you take out a payday loan, the promise to borrow up to $1, 500 is just a scheme. Most states in America only allow you to borrow a maximum that usually ranges between $300 and $500, but depending where you live the maximum amount could be lower, or payday loans could not be allowed as in Georgia. Still you could borrow money living in this state because payday loan lenders are particularly tricky to get you going with their "fabulous" deals even if the state treats them as felonies.
More Inconvenience than Benefits
Besides state financial limits when it comes to short terms loans (outlined to prevent usury) you can only borrow a percentage of your monthly income, but far from the amount that you can get, the main problem is the interest rate that you will have to pay. Payday loans are usually expected to be repaid within the next two weeks after you get the money, but with the huge interests added to the borrowed amount, chances is that you have to go for an extension or rollover that will keep increasing your debt as a snowball running downhill. Therefore, you must pay close attention to the amount of interest to ensure you can repay the loan in a timely manner.
In lending agreements, collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan. The collateral serves as protection for a lender against a borrower's default - that is, any borrower failing to pay the principal and interest under the terms of a loan obligation. If a borrower does default on a loan (due...
NB Global (LSE: NBLU) is a large British investment company dedicated to senior secured loans in large US and European companies. Established in April 2011, the company is a constituent of the FTSE 250 Index. The Chairman is William Frewen.
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