Are Payday Loans Worth It?

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payday loans

, also referred to as short-term solutions to money problems everywhere – on city buses,billboards, in newspapers and online. While getting a small loan likethis is a fast and easy fix to a financial problem, the question manyconsumers ask is “Is it worth it?” There is little evidence to disputethe fact that

payday loans are convenient and that you can becomeapproved quickly and have the money put into your bank accountthe same day that you apply for the loan. But are they the deal of alifetime? What's the catch?

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Payday loans are really quite easy to understand. Usually, you willonly need to log onto the Internet, locate a lender, provide somebasic information, such as proof of employment, your monthlyearnings, proof you are over 18 years old and your active bankaccount information. Upon approval, the money is simplytransferred to your bank account and you are done. The 'catch' associated with payday loans is the high rate of interestthat is often attached to these loans and the fact that they must bepaid back quickly. Most typically, the interest charged on this typeof loan can range from 10 to 25%. For example, if you borrow $100

you will be required to pay back $125 on a loan that has a 25%interest rate attached to it. The reason that such high interest ratesare charged on these loans is due to the fact that most of theselenders do not do any type of credit check and therefore must beable to absorb a high level of non-payments from borrowers. Quiteoften, those consumers that take out payday loans have poor credithistories, so the risk is high that the lender will not get the moneyback, or at least, not on time.Payday loans are great for those times you are facing an emergency