| Payday Loan Fair Credit Borrowing |
| By Credit Federal |
Published
07/15/2007
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Payday Loan
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Payday Loan Lenders Offer Cash to Bad Credit People
No one likes to pay interest and fees. Sure, payday loans may have a high fee, but even a $500 credit card balance could cost you nearly $1,000 if you made minimum repayments of $10.00 per month. Both credit cards and payday loans are financial tools which can be used wisely or irresponsibly.
Right now, most states allow consumers the ability to grab a fast cash payday loan. But that could change if some lawmakers have their way. Their main argument is the fee charged by lenders, when converted from a fee-based to a short term loan interest equation. You see, payday lenders do not charge interest. Instead, they charge a flat fee for the short term of the loan. Since most loans are for only two weeks (from one paycheck to the next), the fee is higher than what a credit card would charge during the same time frame. Unfortunately, not everyone can qualify for a credit card.
Should only the rich; with excellent credit scores, be entitled to cash loans?
Payday loans provide a valuable financial service to consumers in need of emergency cash, or who are otherwise short on money. The cost factor in repaying an overdue loan doesn't necessarily mean there's a problem with the payday loan process, but maybe the problem is irresponsible use. But one thing about payday loans, is that they do not charge different rates according to applicants' credit report scores. It could be said that payday loans are much more equal opportunity loans.
Payday loan lenders typically do not perform credit report reviews as part of the loan approval process. In fact, most payday lenders readily and knowingly grant loans to bad credit people. The lender is assuming a high risk of borrower default and; since the loan is for a short term, a fee is charged instead of an interest rate. If the fee was converted to an interest rate comparison, it would be much higher than that of a credit card. Nevertheless, if used responsibly and repaid timely, the ease of obtaining a payday loan remains a viable option for cash strapped consumers.
To get a payday loan, applicants write a personal check to the payday lender for the amount of cash they want, plus the fee charged by the lender. Typically, the amount of the fee is based upon the amount borrowed, not according to the applicant's credit rating. This means; once again, even bad credit people can get approved and not have to pay higher fees than good credit payday loan borrowers. Hence, unlike other forms of credit, payday loans could be praised as being more of an equal opportunity lender.
If your state legislation is considering restrictions on payday lenders or banning them entirely, let them know that your decision to obtain a payday loan is yours... not theirs... and that you do not want this tool and right taken away from you. Meanwhile, submit your bad credit loan application now.
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