Best Payday Loans

Why Payday Loans Aren't a Bad Thing

Many people maintain that payday loans are nothing more than predatory lending, because they prey on the low-income families who need a short term loan to make ends meet. The reality is, the fees for these loans are typically no more than $15 to $20 per $100 on the loan, and when used responsibly, they can be incredibly helpful. While yes, it is true that these rates can get incredibly high, payday loans fill a void in the financial borrowing market that many people rely on.

How Payday Loans Work

To qualify for a payday loan, one must prove employment by bringing in their most recent pay stub to show their pay schedule, and a checking account. The person taking out the loan writes a postdated check (for the next pay period) to the lender, and gets the cash from the lender right then and there. When used correctly and paid back in full on time, it works much better than asking a friend or a family member to borrow money. Critics say the annual interest rate on these loans easily hits triple digits, and thatís why they're often considered†predatory.

High Risk, High Reward

People who turn to payday lending alternatives are high risk, and the reality is, payday lenders fill a segment in the finance world banks are not willing to touch, and people need help. These people typically have no credit or poor credit, and therefore would not qualify for a credit card, or a personal loan from their bank. When people are in need, they're not thinking about the effective APR on the loan, they're thinking about the $20 fee on the $100 they need, which is 20%. Credit card rates easily exceed this rate over the long term, so in the short term, itís not much different.

Don't Fall Into a Borrowing Cycle

Critics say payday lending causes a chronic borrowing scenario. While itís true some people may have trouble paying back that $120 from their next paycheck without having to resort to another loan, simply taking one loan does not automatically suggest the borrowers will be on a constantly lending cycle. However, borrowers should recognize that if they are going to be unable to repay the loan as required, perhaps a payday is not, after all, the best bet for them.

Benefits of Payday Loans

In an economy where it has become increasingly harder to make ends meet, the short term loans help those in need take care of bills falling due between paydays. It keeps a business up and running and feeding money back into the economy. It gives people who otherwise have no option an option, and touches a sector of finance no bank is willing to venture into - it fulfils a genuine need. While there are risks with using payday loans, there are risks with misusing anything in this world, be it a financial product or otherwise.