We live in a community where the need for money grows day in day out since everything surrounding us requires money. So right now, there is nothing to hide about how millions of people are having financial struggles.
In addition, most employed people are living paycheck to paycheck—and it’s a dangerous idea. But there is no other option, especially the hard times of the Coronavirus pandemic. And that’s the main reason why payday lenders are growing since the demand is now higher than before.
Before we head to the reasons why people get payday loans, let’s first understand payday loans.
What is a payday loan?
The definition of a payday loan is the kind of a loan that employees get and repay during their next paycheck. In most instances, the borrower repays the loan within two weeks. And that’s why you must have a steady job before you can apply for a payday loan.
In addition, payday loans consist of lower loan amounts starting from $100 to $1000. Some other lenders can only give you up to $500. This loan amount shows that you cannot achieve a long-term financial goal using a payday loan.
Loans with bad credit have very high interest rates compared to other types of loans. The interest rates of a payday loan start from an APR of 390%, going upwards even beyond 1000%.
Now, let’s see why people go for payday loans despite having very high interest rates and a short repayment period.
Reasons why people take payday loans
1. It’s easy to get the cash
Unlike other loans that take more than 24 hours for the lender to approve the cash, payday lenders approve your loan within minutes and possibly release your money within a few hours.
That’s why payday loans are a good choice for dealing with emergency requirements. In addition, the application process is also easy with a few conditions.
2. No credit checks
Indeed, people have gotten used to having bad credit scores. And with the current economy, it’s becoming hard to rebuild credit scores. So you get in a dilemma when choosing between building your credit score and feeding your family. But, of course, anyone would choose the latter.
The payday loan lenders do not conduct credit checks before they can approve your loan. Instead, they believe in you because you already have a job and can repay the loan.
3. To pay bills
It feels terrible to be unable to pay bills in the middle of the month. And that time, you may be paying school fees for your kids. So, you find yourself going for payday loans in the middle of the month.
The good thing about payday loans is that you can use them for any reason that you want. Moreover, the lender does not restrict you on how you should use the money you get.
4. For debt consolidation
You may be having a mortgage or an auto loan, and you are on the verge of losing your property to the lender. If you can get a payday loan to pay a few installments, it will help you to stop the repossession.
However, it would help if you were more careful when dealing with debt consolidation loans. Only take a payday loan if you have enough income to cover the payday loan and your budget.
5. To repair a car
Of course, you will not need an auto loan to take a few car spare parts. Instead, you can get a payday loan to help you repair your car since you will not require a lot of money. In addition, it will not take long before you get your vehicle back on the road again.
6. For medical emergency
No one wishes to be sick or have a sick relative, but it happens to us anyway. The bad thing about sickness is that no one knows when it will start or end.
So, the only better option in terms of time could be payday loans. This fact is due to the easy approval of payday loans. And that’s another big reason why people go for payday loans.
7. Running from friends and relatives
In most cases, borrowing money from friends and relatives brings about hatred if you don’t repay on the agreed time. However, since you deal with someone you don’t know in payday loans, you may have to choose them.
In addition, you may opt to keep your problems to yourself instead of broadcasting to other people.
It would help if you were more careful when taking payday loans. If you miss several payments, you may end up defaulting or in a debt cycle.