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Need cash urgently? Try Payday Loans or alternatives.

March 20, 2012  by: Ankit Neerav  Points: 12   Category: Others  Earning $0.40   Views: 2485

Most of us end up cash strapped at the end of a usual month. We think that payday loans can help us out but do they actually?


What is a Payday Loan?

A Payday Loan, also known as a cash advance, payroll advance, payday advance or deferred deposit loans. These are usually very short term loans of relatively small amounts that are to be returned the next time that the borrower gets paid his monthly salary. The lender or company charges a fee or sometimes a certain rate of interest in exchange for loaning the borrower the desired amount of money until his/her next payday. Payday loans depend upon the borrower''s previous payroll and employment record.

Legal Aspect:

Different types of legislation regarding payday loans are available in different countries and most of the times these legal provisions protect the consumers in general from the exorbitant interest rates that a company or an individual may charge on a payday loan. On the other hand, a number of countries have banned payday lending completely. However in countries where they are legal, they can be of great use to newly employed people and people who have just started out in their careers.

How does it work?

From the point of view of the lender payday loans carry substantial risk as these types of loans are calculated to have a default rate in the range of 10 to 20%. Moreover the use of legal means or even the likes of loan recovery agents turn out to be uneconomical for lenders as the loan amount is generally very low. The most popular destination these days for borrowers is the internet and the number of companies offering these services online. These websites simply take an Automated Clearing House (ACH) authorization to secure the loan for the borrower. The primary reason for their popularity being that this method cuts out the general hassles of going to a bank, completing lengthy paperwork and additional scrutiny before securing a loan.


Despite their growing popularity, consumer forums these days advise us to avoid payday loans. There are several reasons, the most important one being their high rates of interest. The best alternatives suggested are:

1. You may consider small loans from a co-operative union bank or a trusted small loan company. Some banks also offer short-term personal loans for small amounts at very affordable interest rates.
2. Taking a cash advance on a credit card is also an option but this may result in a higher interest rate than usual. Search for the credit card offers online and otherwise with the lowest costs.
3. Contact your local consumer forum or credit counseling service if any to help working out a debt repayment or restructure plan with lenders.
4. Prepare a realistic and manageable monthly budget including every little expense you may incur. Also try and build up and maintain some savings, small deposits always help.
5. Ask for an advance directly from your employer. The best way but generally difficult to get credit in times of need and that too without interest is asking advance salary from your employer.


On the whole, these loans are quite useful for some people but not advised for some. One needs to consider all related factors carefully before going in for a payday loan and decide for oneself. The alternatives generally advised may also work for many people. So decide for yourself and try out payday loans only if they suit your needs.

Author: ushakiran        
Posted Date: 03/21/2012    Points:2    

Good article, hadn't heard of the term payday loans so far...I still believe in the good old saying , which says that it is always better to stretch only within ones limits...
Author: Ankit Neerav        
Posted Date: 03/23/2012    Points:4    

Ya, you are right. One must avoid taking credit and loans as much as possible, with sound financial planning and a good savings back up . But for students with part time jobs or people newly starting out in their career or even for senior people sometimes during difficult times or times of some emergency it becomes difficult to get extra cash immediately. Also, if the need is not very urgent, most people find it embarrasing to approach relatives or friends. At this time payday loans are one's sure source of help. Even if one doesnt want to try them, their alternatives work for most people.

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