Almost every object in the world has its usefulness as well as its abuses. Payday loans are no different from these. It is liable to be used but can also prove really useful when people use it with proper judgement and discernment. Payday loans can actually prove really useful for many people.
Concerns regarding payday loans
The biggest concern with payday loans online is usually the fact that they charge exorbitant rates of interest. This is of course true. When compared to the other traditional loans, the interest rates for payday loans are really enormous. However, the high interest rates are charged at the cost of something else. Payday loans require much less time and formalities to access. Lending money via payday loans is usually done with a huge risk factor involved especially because there is no stringent verification of borrower credibility which is usually done by banks and other such financial institutions which provide traditional loans.
Payday loans are also provided in the minimum amount of time. There are some websites which provide the loan in as little as a space of just twenty four hours. All these advantages have to come at a price. Since the risk element while lending out money is so high, the interest rates are hiked so that the losses can be covered. This is the reason for the high interest rates that the payday vendors charge for the loan.
Another of the common complaints pitted against payday loans is the fact that people tend to run into financial ruin when they take a payday loan thinking to repay it when they get their next salary. Often by that time another bill comes by and they are not able to pay the first, taking another payday loan to repay the first. This continues until one goes bankrupt. Thus it is argued that payday loans lead to financial ruin.
It is to be however duly noted that payday loans if taken with a thorough financial planning can actually solve the issue of a sudden bill or tax payment coming up. Before taking a payday loan, a proper budget plan is necessary that can be as minute as regulating how much one spends in a day. If a proper estimate of one’s possible sources of income and the expenses are made, it becomes very clear to one, whether that person would be able to pay the loan back in time or not. Most people who do not follow this run into problems but this is rather their lack of foresight and planning. The blame cannot be put on payday loans alone.