Payday loans are classified as small, short-term cash advances. Understandably, when we say online payday loans, these are the cash advances you apply for through the Internet. Like any other businesses, the lending industry has widened their market with the use of modern technology. To give out the best offers, some direct payday loan companies have set aside customer information verification process to be able to approve loan applications in as quick as an hour. They offer bad credit faxless payday loans basically to every individual they can lay their hands on.
Cash advances of this kind may be tempting to consumers who are in dire need of cash as soon as possible. Let this be a warning. Services of these lending companies come in high prices (that would be the interest rate and/or service fees). They may say that they can help you to be financially free, but their services are very hard to pay! Instead of financial freedom, you can be buried deep in debts if you don’t make decisions wisely. No matter how hard lending companies campaign about their ability to help individuals with their financial problems, proofs are yet to be seen.
Most lending companies have established their offices in areas constituted with low and middle-income citizens. This is one reason why they have lowered their standards in approving applications for loans. One spokesperson of a lending company stated that they cater to the poor and persons who are being denied by bigger loan companies who have higher standards in giving out cash advances. Logically, borrowers who have a minimum income or bad credit history will be running to instant payday loan companies if they ever need immediate cash but don’t have enough savings for such emergencies.
Lenders give out a minimum of $500 for loans. Let’s say an individual earns $500 every payday. If he ever signs up for a cash advance from these lenders, he is on his way to financial doom. You may be asking why and how? Quick payday loans have a short term and a borrower needs to pay off his debt on his next paycheck. Of course lenders won’t lend you money if they are not going to profit from it. Lending is a still a business and runs because of profits. Now these profits come in the form of interest rates. Though some states have capped the maximum rate for interest fees, loan companies have found loopholes where they can charge service fees to replace what they have lost from the original interest rates they were charging their customers. As common sense would show you, the borrower won’t be able to pay his debt with just one paycheck. He will have to extend his loan term and that means the lending company will again charge him additional service fees for the extension. Aside from this, the consumer will also have to go through another problem in looking for cash so he could handle the household budget and other bills he needs to pay.
With just these basic facts on how the lending industry works, do you think they can really alleviate the consumers’ financial problems?