A payday loan is an intended short-term loan (usually to be paid back within 30 days) and is often considered to be an ‘emergency loan’ and used as a last resort in the sense that it should not be relied upon as a monthly get-out clause.
This kind of loan ranges from anywhere between $100-$1500. The amount borrowed is generally smaller than other lending companies. A payday loan will have noticeably higher interest rates because of the ‘short-term’ nature and this is normally set at about $25-$30 for every $100 borrowed. Therefore if you borrowed $500, you would end up having to pay back $750 within the 30 day period.
Because there are rarely credit checks for people acquiring payday loans, many people who use them are not financially stable. This can be a slippery slope especially when you consider the high interest rates. However, if used properly it can be a great short term fix.
Should there be loans granted with no credit checks? The majority of people are divided in opinion but it is no doubt that payday loans have helped a number of people out of varied financial black holes.