Payday loans have received a lot of bad press recently. The reason for this is for the questionable practices done by payday loan companies. The practice that receives the most criticism is the high interest rates of payday loan. These high interest rates are charges because the loan amounts are small and borrowed over a short period of time meaning that payday loan companies would not make a profit by charging rates similar to typical loans.
Another reason payday loans are sometimes thought of as scams is that borrowers can potentially get stuck in a debt spiral and find it difficult to pay off the loan. For this reason, borrowers must make sure they have the funds in place to clear the debts on their next payday. It is very important that borrowers have a financial plan in place and do not take out a payday loan (or an loan) without proper consideration.
As you can see, it is easy to see why payday loans are sometimes criticized or thought of as nothing more than a scam to make money for financial institutions. However, most people who apply for payday loans have already tried all other options available to them and sometimes the only option they have left to sort out their finances is to take out a payday loan. In this situation they can be very useful and actually will save the borrower money when compared to credit card fees. If you are thinking of applying for a payday loan, ensure that you a reputable website such as instant no fax payday loans and read all the terms and conditions.
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