Payday Loans

Payday Loans are very much popular in western countries like USA & Europe. But the Concept of Payday loans is very new for countries like India. In fact, in India this new variety of Loan has to come and penetrate the market in future.

Definition: Payday Loans -

- A payday loan is a short-term loan to cover your spending needs. It is secured against your future paycheck.

- Wikipedia: A payday loan (also called a paycheck advance or payday advance) is a small, short-term loan that is intended to cover a borrower's expenses until his or her next payday. The loans are also sometimes referred to as cash advances, though that term can also refer to cash provided against a prearranged line of credit such as a credit card (see cash advance). Legislation regarding payday loans varies widely between different countries and, within the USA, between different states.

- Investopedia: A payday loan is supplied by a third-party lender and it is supposed to help consumers get out of last-minute financial jams by offering a cash advance on an upcoming paycheck. While getting out of a tough spot is certainly a good thing, the interest charged by payday lenders typically surpasses 100%, which could make a tough spot even tougher. So, are payday loans a great service for those in need, or are they an example of loan shark companies preying on people's desperation?

The amount of interest charged by payday lenders is no joke. Annualized interest of between 200% and 500% are the industry standard.

Explanation:

Payday Loans are the worst ever Debt Products, worst than the Credit Cards. Because they charge Annual 200-500% or even more interest rates. Investopedia says that, “you're lucky if you might not be familiar with the term "payday loan".” – So you can imagine that how dangerous these loans are?…..

How Payday Loans Work? -

According to Investopedia,

“A payday loan works like this: You're short on cash and can't wait until your next paycheck comes around, so you head off to your local payday lender (some of whom are even online these days), and ask to set up a payday loan - usually somewhere between $50 and $1,000, although the higher limits are usually harder to qualify for. You write a post-dated check for that amount plus the fees you now owe to the lender. You get your money right then and there and, when payday rolls around, the lender will cash your check and collect its profit.
Typically, people who use payday loans find themselves in situations where they are presented with few other financial alternatives. In their eyes, a payday loan is a way of staying afloat for a short period of time without having to ask for handouts. People with low credit or no credit are ideal customers for payday lenders.”

Payday lending is a controversial practice and faces both legal battles and public perception challenges in nearly every place where it is practiced.

According to Finance Gurus, Payday Loans develop a bad financial habits in you. Once you take Payday Loans, you become addicted to it. Because Payday Loans are available instantly without much documentation. You just have to show your Income proof and have to sign a post-dated cheque & that’s it. Your Payday Loan is sanctioned. In the longer term, people become dependent on this.

Indians are lucky because this type of loans are not available in the Indian Market. But Beware….. They will enter soon in the Indian Market.

If you ever hear the name “Payday Loan”, Just change your path. Don’t ever go for it. Because its a highly addictive.