An instant payday loan is a short term loan that can help cover unexpected financial emergencies that crop up. If you have not yet received your next paycheck, this type of loan will give you the money you need to get you through until then.
A short term loan can be the relief you need if your car breaks down and you need it for work, your house roof springs a leak, or you need a prescription medication that isn't covered by your health insurance. It will be much easier to pay back a short term cash loan than to pay for checking account overdraft fees, which can easily run $35 per bounced check.
If you get a loan, then you won't have to worry about bank fees and returned checks. Returned bounced checks can result in damage to your credit score, fees from the company you bounced the check, and even legal action.
Many people are confused by how much the APR rate is on an instant payday loan. An annual percentage rate shows borrowers what a loan really costs and how their credit is affected. The APR showcases the late fees and finance charges that credit cards can have. Credit card holders are shown what the total cost of their credit card debts are, including the interest rates on the credit cards.
When the APR is used with short term loans, payday lenders have to convert the simple interest rate into an annual percentage rate. For example, say you have a 30-day, $1000 loan and the simple interest rate is 10 %. In 30 days, you will have to repay $1100, since the charged interest amount is $100. Under the APR rules, the lender has to say that the APR is 120 %. This comes to twelve, 30 day periods in one year. Some people believe that this means that the interest on the $1000 loan would be $1200, but this is not the case. The only way a borrower would be charged $1200 is if they renewed the 30 day loan 12 times, or once each month for 1 year.
This can be a drawback for people that want to take out a cash loan. Borrowers will need to tailor their spending habits in order to pay back the loan when it becomes due so that they don't end up paying more interest on their 30 day loan. Some people will have to add to their income, either by getting a second job, or by holding a garage sale or selling their household items on eBay, so that they can eliminate their debt load.
To find a loan company that offers the lowest interest rates, research the Internet or talk to friends or relatives who have experience with payday loans.
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