However, this way to get quick cash can turn into debt even faster if you are unfamiliar with how payday loans work in your country. In this article, we will introduce you payday loansaddressing what they are and how they work so you can avoid falling victim to the debt trap.
What is a payday loan?
A payday loan refers to a loan borrowed from a third party that has a high interest rate and must be repaid in a short period of time, usually within a two-week payday cycle. The loan depends on the amount of your income, the borrowing limit being half of your net monthly salary in most provinces.
Indeed, many people are paid by their employer every two weeks and payday loans are there to take over until your next payday. At that time, you are expected to repay the entire loan, its interest rate, and all other fees.
Get a payday loan
Getting a payday loan is not a complicated process; all you need is a job, your credentials, a bank account, and an approved permanent address. However, sometimes you can get this loan even if you do not meet certain conditions because some lenders are not strict about it.
Either you will receive cash in hand, deposit money directly into your account, or the lender will provide you with a prepaid card to use. The prepaid card has the disadvantage of requiring the payment of an activation fee for it to work.
When it is time for you to repay the loan, either the money will be taken directly from your bank account or a post-dated check submitted by you at the start to the lender will be cashed.
Repay payday loans
Limited credit choices primarily drive individuals to seek out a payday loan in the first place. There are several ways to go about repaying your payday loan: you can check if you qualify for a personal installment loan to repay the payday loan and others high interest rate debt it weighs on you since the repayment period is longer.
If your bank refuses to lend you money, you can go to a private institution or subprime lender. Although they most likely offer higher rates on payday loans than your bank, they will still be much lower than your group payday loan.
A payday loan is meant to be a short-term solution. There are many reasons why one might apply for a payday loan, but this type of loan should be approached with caution, especially if you think you will have trouble paying it back on time. It is important that you think about your decision before taking out a payday loan because the interest rates are extremely high and can cause you far more trouble than they are worth.