What Is A Payday Loan?
To start off a simple definition is needed:
“A payday loan is a short-term loan for a relatively small sum of money, provided by a non-traditional lender. The average payday loan is valued at $200-$250 and is extended for a period of 1 to 30 days.”
A payday loan is closely related to a typical short term load but has some distinctive differences in comparison to the traditional loan. The usual loan you may take out is usually (on most occasions) based on your credit rating, a payday loan is based on your pay, your credit history and finally your payment details have no effect over a payday loan amount or duration.
Payday loans have been around since being paid for work existed, in a simplified version it is simply taking out money in which you pay back at the time you receive your next cheque (usually). Payday loans do vary in their usefulness in terms of time in which you have until you have to pay it back as well as how much you can take out. The average amount you can take out, as described above, is around $200 to $250, however, if your income is high the payday amount will also be high, for example, if you bring in $700 a month then it is likely you will be able to take out around $500, the amount is usually less then your income to make sure you don’t end up living from Payday loans, however, you can get your full next months wages in some cases, depending on policies.
Payday loans are not seen as a long term loan nor are they used in order to finance things that a bank loan would, such as a car, home or a lovely summer holiday. A payday loan is usually used in situations where you owe money which needs to be paid in the month your in when you wont have the money till next month.
There are a few disadvantages with payday loans, the most common is the living off of payday loans. This means that having your next months or weeks money one week in hand becomes almost like an addiction in which you then have to continuously use in order to live because of you waited that month without money to be back on track you would have no money to survive for that week.
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