What is a PayDay Loan?

Following on from my last post PayDay Loans Only When You Need Them, where I took a harsh look at payday loans and when you should and should not apply for them, it might be a good idea here to take a closer look now at exactly what is a payday loan?

I know I've already covered the no fax payday loans and explained them at length, but so far I haven't actually described in detail and explained what is a payday loan.

So let's see what is a payday loan.

A payday loan in essence is a fast way of obtaining money that can be deposited directly into your bank account to cover a period of shortfall in your own finances.

The reasons this may happen are many-fold and could result from an overspending early on in your month and leaving yourself with a cash shortfall that won't get you through until your next pay day, or simply not budgeting effectively and finding yourself with a week or two to go before you next get paid and your bank account empty!

So to help you financially through a lean week or two a payday loan is the perfect saviour of the hour! So when you ponder what is a payday loan, it is really a simple way of applying for a very short term, fast cash loan that you can find online from many lending institutions.

The interest charged on a payday loan is very high when compared to mainstream loans such as secured or unsecured loans, but because the money borrowed is repaid in a very short time, typically two weeks, the actual cash amount of interest is quite small. There is also a set-up fee that is charged but the amount of this (as well as the rate of interest) differs between lenders. So it's always a good idea to shop around to find the best payday loan deal.

The penalty for late payment is harsh, so you had better be sure that you can repay the loan in full on your next payday to avoid this. Late payment penalties include a further static fee plus an additional interest charge added to the repayment figure, so if you think that you may have a problem repaying the payday loan, then you should consider your actions very carefully before applying for one.

So as concisely as possible, that explains what is a payday loan.

For more information, please read earlier posts in this blog where several aspects of fast cash loans and payday loans are covered more extensively.

PayDay Loans Page