Basic Facts About Payday Loans – What Are The Facts!!
Payday loans represent a financial service, a type of loan that is quite different from other loans in every aspect other than in the basic idea of it. The basic relationship is still there. The lender lends money to a borrower who then has to return the money. However, everything else is a bit different from the usual types of loans and that is why we believe that Australian people need to learn as much as possible about this specific type of loans. It is because of this and because these loans have never been as popular here in Australia as they have been in some other parts of the world, most notably in the USA.
The first major characteristic of payday loans that makes them quite different from other loans is that they can be obtained by anyone who has a regular source of income. For the most part, it does not even have to be a regular, full time job. For example, most lenders in Australia will be willing to lend payday loans even to those with part-time jobs and even those who are living off of social help. They are only interested in whether you have a steady income and they do not care where you get it from, as long as you can prove that it exists. Other than this, your name and the number of your account, they will require nothing else. This makes it far easier to get a payday loan than any other type of a loan. Even people with the poorest credit history and rating can get a payday loan.
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Payday loans can also be obtained extremely quickly, with most lenders making the money available to you that same day, or even quicker if this is an online lender you are dealing with. They do not need to go through the time-consuming process of credit checks and they are capable to processing applications in matter of hours and not days or weeks. Because of this, payday loans are perfect for people who need the money straight away and not in a week or even more.
Payday loans are, however limited as most lenders will only be willing to lend you between $100 and $1000. For bigger sums you will need to go to more lenders and to find ones that lend out more. Also, if you build a long-term relationship with the lending company, you might later be able to borrow more than just $1000. The lenders need to limit the amount of money that they lend out in payday loans due to a specifically high default rate that is far higher than with other, more traditional loans. It is estimated that as much as 20% of payday loans end up defaulted. That is, people do not repay them.
We need to mention another very important aspect of payday loans and one that makes them a preferred option in only very specific cases and that is the fact that interest rates on them are very high, much higher than with other loans. The APRs on payday loans can go to upwards from a thousand percent and once again this has to do with default rates and the fact that payday loans are usually repaid very quickly, which would make smaller interest rates unable to make lenders money.
As you can see, payday loans are very specific in a number of aspects and even though they have their downsides, they are a necessary financial service that can be of huge help to anyone in certain situations. As long as you have a regular income, as long as you repay them in time and as long as you only use them from time to time, payday loans can be extremely helpful in certain situations.
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