A Few Myths About Payday Loans

A payday advance loan is a short-term loan designed to offer credit to borrowers who otherwise would not be able to source credit from more established financial institutions, like banks or building societies. The payday loan works by offering a small sum of money to the borrowers in exchange for an agreement that the borrower will repay the sum in full on their next payday. How much a borrower will be due to repay on a payday loan depends predominantly on what country the application is made and the payday loan company to which the borrower has applied. In the uk, the general rate charged in A�25 for every A�100 borrowed. This means that for a A�200 loan, the borrower must repay the total sum of A�250.
There are a number of myths circulating regarding payday advance loans. This type of credit has come in for a lot of negative press due mainly to the audience at which it targets its offerings and also because of the rate of interest charged on every payday advance loan offered to low-income borrowers. What is often not taken into account however is where the borrowers should source credit were the cash advance loan an option that was not available to them? Unfortunately, How Do Car Loans Work Through A Bank there are very few sources of credit available to people from low-income segments of the population. The majority of lenders, be it a bank, a building society or another type of financial institution, require borrowers to have a strong credit file. The majority of people sourcing credit from payday loan companies do not boast a strong track record in this respect and thus, when they are in desperate need of credit, they turn to a payday loan company.
The high-rate of interest on payday advance loans is due mainly to the risk involved in offering credit to low-income borrowers. Where there is a risk there is invariably a charge, however providing the payday loan is paid off on-time it is quite feasible that the total amount due will amount to less than that of a bounced cheque or bank overdraft fees. The main issue surrounding payday loans has been the moral justification for such loans and whether credit should be offered to such segments of society. However, without payday loans, there How Banks Evaluate Loan Requests would be no line of credit open to a whole segment of borrowers in need of cash prior to their next payday. It is also worth noting that criteria have been laid down by cash advance loan companies and by regulatory bodies in order to ensure that the borrower will make the necessary repayments on-time. Very rarely will a borrower take out a payday loan without first considering all of the consequences. Every cash advance loan company must emphasise the rate of APR on their loan offerings on their websites and promotional materials.

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