What are payday loans?

Payday loans are typically something you want to avoid. However, if you are asking yourself if payday loans are a good or bad option for you, well you might be in need of one. Basically, payday loans go underneath several different names – anything from payday advances, salary loans, payroll loan, small dollar loan, short term or cash advance loan – all of these fall underneath the payday loans category.


Basically, the only thing you really need to get a payday loan is that you have a job of some kind with that has a traditional pay day. However, this is not always required either. Many places give out payday loans to people who do not have employment, at least in the traditional sense. Where the name comes from though is that you are taking an “advance” or pulling out money from a future paycheck of yours to have that money now.


It is almost always a bad idea to get a payday loan because of how much the interest is, however it is sometimes the last option and the best option for you depending on your situation. The advent of new legislation within the USA and different states has also brought the payday loan industry up from its more shady practices and made it into a more ethical business for people to operate within.


Many jurisdictions now limit the APR that payday loan institutions can lend at. If you are not familiar with APR, it stands for annual percentage rate and is the rate of interest that your payday loan is being charged at. In fact, payday loans have earned such a bad name in some places that many regions completely outlaw them altogether, forcing these operators out due to usury laws. While those regions that still do offer these salary loans, they usually start with an annual percentage rate that is governed by the Uniform Small Loan Laws at 36-40%.


Which, in case you did not notice, is extremely high interest.


The crazy thing about about payday loans is the inherent risk. Most lenders would say payday loans are hardship loans and thus have a higher rate of risk than other forms of loans. However, studies done have shown payday loans provide no extra risk than any other form of lending. Which is really crazy when you think about it, because these loans have a fast turn around time, extremely high interest rates, and people are looking for them every single day to help them get past moments of hardship in their life.


So being a payday loans lender sounds like it has a lot of benefit. Because of this benefit and shady business deals though, governing legal bodies have cracked down hard on the cash advance business industry for usury and turning their customers small debt into giant balloons of debt relatively quickly due to monstrously large annual percentage rates that outstrip almost any credit card you could imagine.


If you need money, you are almost better doing anything else BUT getting a payday loan. And that is a bonafide fact!

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