Payday loans are designed to help people get through the month of falling short to expenses. This was initially the purpose of payday loans. The money that is being borrowed is provided with the expectation of it getting paid within 4 weeks or at the end of the month whichever is applicable. Although a borrower can avail for a longer period, usually up to 8 months, but payment will need to be given on an installment basis. These payday loans are known to be for small amounts and short in term.
Payday loans are often regarded as high cost loans. This is not entirely true and only becomes a high cost loan if you revolve the credit by acquiring a new loan to pay for the existing one. Managing your payday loans can help you with your actual needs.
Costs on Having a Payday Loan
Licensed lenders follow a set of rules when providing a payday loan service. Interest payments are required to be paid by the borrower for using the lender’s money. These interest payment rates are applied to the principal and are often capped as required by the government. Payday loans also incur additional costs on late payments. Finance charges rate are also applied to the principal in case of default on the payment that is committed.
Payday Loans Are Offered for a Short Period of Time
Unlike any other loan, payday loans need to be paid within a short period of time. The intention of this loan is to provide clients small amounts of loan that can be eliminated at the shortest time possible. Payday lenders use this to revolve the capital at the shortest period of time and still earn from it. Besides, it is a business after all. Having a payday loan may prove to be an effective means if you manage it properly.
Avoiding Getting Into Debt
Payday loans can get you into debt like any other loans. Even if the loan is for a small amount, mismanaging on how to handle the loan can create a debt that would be hard to get out from. An example would be revolving your credit and taking a fresh loan to cover for other expenses from which you fall short every month.