Payday loans are short term loans with the principal value in between 0 to 0 and normally ranging for two week terms. The interest rate can be more than 500% of the normal market rate. The most important fact regarding payday loans is that any person with or without a good credit rating can apply for a payday loan and can even get approved within 24hrs of application. This makes payday loans a perfect option for anyone who has been rejected through traditional lending institutions like banks.
Payday loans are highly different from the loan that we get from a bank or any other lending institutions. A bank does a good amount of background checks on the borrower and examines if he has any loan default or has some negative remarks on his credit rating. If they found you with some misleading history then you are sure be rejected for your loan application. Moreover, a bank also requires you to go through massive paper work and other official formality before you are provided with your required amount. Even though you are approved for your loan you cannot expect your money to reach your bank account anywhere less then 5-6 business days.
However, a payday loan can be approved without any background check and with zero or very little paper work. Besides that, the borrower can receive the money into his bank account within 24hrs of application. These points make payday loans an exciting option for anyone looking for a short term loan.
But you should remember that a payday loan carries a huge interest rate anywhere between 400-600% while a traditional loan has an interest rate of around 40-60% in general. Though a payday loan might seem as a lucrative option, it is always advised to avoid payday loans and have an emergency fund to solve your immediate financial crisis as non payment of payday loans can pull you in a vicious circle of debt.