Your Only Guide on How a Typical Payday Loan Works

It’s the last week of the month and your bank account is completely empty. You just need to make a quick run to the grocery store and pay a couple of pending bills and then you will be able to comfortably make it to the next month, to your next paycheck. The problem is the few days in between and not being able to finance urgent expenses.

The solution is a quick payday loan. This is a very useful financial service that few people aren’t aware of and don’t get the opportunity to use. Here is everything you need to know about how they work.

The Catch

The amount that you can borrow in this loan is usually quite small even if you have a good salary. These loans can also be extremely expensive to handle if you go over the payment date. In some cases, the charges on the loan amount can grow quickly to more than the loan itself. In recent times some legislative changes have been made to protect consumers from the astronomically high-interest rates on these loans.

For army personnel, the maximum interest rate is limited to 36% annually. However, for the general public, these loans can still be excruciatingly expensive. It can quickly drive a person into debt quicksand where they find they have to take out a second loan to pay back the first.

Eventually, the person is trapped under far more debt than the loan that they actually took out. Some lenders can also demand access to your bank account. This gives them the authority to charge you at will and puts the user at risk of being put under the pressure of overdraft charges when the lender tries to forcefully withdraw the amount. Lenders will go to any extent to get their money back and it can be very stressful for the user.

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