One of the simplest forms of loans that are being offered by financial institutions today is a loan called payday loans. These loans can also be referred to as payday advance, cash advance loan, salary loan as they all refer to making a loan payable against a future payroll due within 20 days or next payroll due whichever comes first. Reason for payday loans being offered is for covering expenses where your current cash on hand is insufficient up until the next payday. Payday loans are one of the most popular loans in the industry today.
Payday Loan Rules
The rules and regulations that govern a payday loan actually vary from different locations. Some places don’t even have a regulation that has been established to ensure the proper processing of payday loans. In these places, the financial institutions often charge very high interest rates that can range from 350% to 400% annual percentage rate (APR). This is why payday loans are often involved in scam cases and controversies. This is the same reason why some locations do not allow payday loans to operate.
In countries where payday loans are regulated, the difference in interest rates do not differ that much. They still are considered as one of the highest interest-bearing loans compared to the other loans that are available in the market. Although regulations have been placed for payday loans in some locations, it does not keep itself away from scams and controversies.
Why People Get a Payday Loan
Getting a payday loan is one of the most easiest loans to apply for. Most people who apply for a payday loan get approved without checking against their credit score. Most payday lenders do not require validating the applicant against their credit score granting them loans even with existing loans or debts against them. As long as the applicant is earning a stable income and can draw a post-dated check, most likely they will be granted for a payday loan if they apply for one.
Payday loans are often used to make ends meet. But without properly monitoring and rolling over the debt, getting a payday loan could end up being a bad idea.