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The Advantages And Disadvantages Of Using Payday Loans

Jun 18, 2008
Whether you've actually borrowed one or not, chances are that you've heard of the infamous payday loans. Of course, there are many arguments for both sides about whether one should actually borrow money from a payday loan or not, but the solution to the problem is actually quite simple. Contrary to many people's beliefs, payday loans were not originally created to rip-off the little guy. In fact, the history of these types of loans travels all the way back to the late 1950s when the State of California made it legal for these types of loans and transactions to take place.

When it comes to anything financially related, however, there are always going to be advantages and disadvantages. Payday loans are no different and we can see easily the benefits and downsides to borrowing small amounts of money over a relatively small amount of time. For example, if an individual is living paycheck to paycheck, yet borrowing payday loans every week just to squeak by, his or her loan will actually act as his or her paycheck instead, which means that he loses money in the end. Furthermore, the individual gets stuck on the cycle of borrowing and repaying just to make it to the next paycheck every week or every other week.

On the other hand, there are plenty of success stories when it relates to payday loans, especially when they're used according to how they should be. Even though there are no hard and fast rules as to how payday loans should and shouldn't be used, everyone should be capable of making their own discretionary judgments when dealing with loans and financial transactions of this sort. For example, if you know that you won't be able to pay back the money for some reason with your normal paycheck then payday loans should not be used. In addition, if you are not comfortable getting by on very little money for a week or two then payday loans shouldn't be used.

Borrowing payday loans with the right intention and the right way will yield good results in the end. For example, think about a situation when you've been without money for a little bit, but would only need a small loan to get you to your next paycheck, and let's assume that the paycheck will have some overtime compensation attached to it. Certainly you'd be able to borrow a payday loan in this situation because you're guaranteed extra money in your paycheck that you usually don't see.

Furthermore, many people who are opponents of payday loans insist that the borrowers always have to pay high and absurd loan interest. Even though there is a small "fee" to originate the payday loan itself that is the only fee that borrowers are required to pay back, assuming that the loan is paid back on time in the first place! Unfortunately, therein lies the problem of many consumers who get trapped in payday loan cycles; they fail to pay back their loan in the time allotted, therefore, they get severely penalized by high payday loan interest rates.

All in all, when it comes to deciding whether or not you should borrow a payday loan it should really fall on your discretionary and good judgment to know whether you'd be able to handle paying back the money that comes in your paycheck. Even though there are many people who can't handle this arrangement, there are plenty of others who have no problem with it at all.
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